The cost of equity capital is the rate of return investors expect to receive from investing in the firm’s stock. There are two primary methods for determining the cost of equity. One approach is to use the Dividend Growth Model to determine the required rate of return on the firm’s equity. A second approach is to use the Capital Asset Pricing Model (CAPM) to determine the expected or required rate of return for a firm’s stock. Explain which you would use and why?

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Mainly two of approach has their own benefits as purpose of study of cost ... View the full answer