Question: Please estimate the cost of equity using the DCF model: RS = D1/P0 + g. So, you need to collect or calculate D1, P0 and

Please estimate the cost of equity using the DCF model: RS = D1/P0 + g. So, you need to collect or calculate D1, P0 and g to calculate the cost of equity: RS How to get D1, P0 and g? 1. Go to Yahoo Finance or Google Finance (https://www.google.com/finance (Links to an external site.) ) and get stock price (P0) and quarterly dividend (Div multiply it by 4 to get annual dividend - D1) for your stocks. 2. Use Dividend Yield - 5 Year Avg which can be found from several finance sites, including http://www.reuters.com/finance/stocks . (Links to an external site.) Please check under financial to find Dividend Yield - 5 Year Avg. If you do not find the dividend yield, use the analysts forecast of earnings growth rate (EPS - 5 Yr. Growth Rate) as g. Now you have D1, P0 and g. Put them in the following formula to get RS for your companies: rS = D1/P0 + g.

General Electric Current Price 29.94 (P0) General Electric 0.23 (D1) or annual dividend General Electric 3.07 (g) Rs = 0.23/29.94 + 3.07 Rs = 3.86

I used General Electric as my company of choice but I think I'm missing something in my calculations; help would be greatly appreciated!

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