One measure of the cost of common stock equity is the rate at which investors discount the expected dividends of the firm to determine its share value.

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This measure is known as the cost of equity or the required rate of return on equity, and it is calculated using the dividend discount model or other methods to estimate the expected future cash flows from owning the stock. This rate reflects the risk and opportunity cost associated with investing in the company's equity, and it is used to evaluate the attractiveness of different investment opportunities or to estimate the cost of capital for the firm.

One Measure of the Cost of Common Stock Equity Is