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Finance Calculators
Cost of Equity Calculator (Dividend Growth Model)
Calculate a company's cost of equity using the Gordon dividend growth model from its next dividend, share price and growth rate.
Cost of equity
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About the Cost of Equity Calculator (Dividend Growth Model)
The dividend growth model (also called the Gordon growth model) estimates a company's cost of equity from the perspective of a dividend-paying stock — the return shareholders require given the dividend yield plus expected growth.
Formula: Cost of Equity = (Next Year's Dividend ÷ Current Share Price) + Dividend Growth Rate
This approach works best for mature, stable dividend payers with a predictable growth pattern. For companies that pay little or no dividend, CAPM is typically used instead to estimate cost of equity.
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