The cost of equity is calculated by CAPM. CAPM stands for Capital Asset Pricing Model. Below is the formula used to calculate the cost of equity.

E(Ri) = R(f) + β[E(m) - R(f)]

β = Beta of the stock.
E(m) = Market Rate of Return
[E(m)-R(f)] = equity risk premium.
R(f) = Risk -free Rate of Return.

NOTE: These are the most important questions to ask investment bankers during an interview.

BY Best Interview Question ON 07 Jun 2021