The Cost of Equity is an investment return which a company offers its shareholders in compensation for their income stream and taking risk of investment with a company.
Cost of Equity which is based on the constant dividend growth model is mathematically expressed here.
Cost of Equity = [Dn ÷ P] + G
Dn = dividend per share to be paid next year
P = average stock price in the year the latest dividend paid
G = expected growth of dividend on next year
A next year dividend is mathematically expressed like this.
Dn = Dc × (1 + G)
Dc = dividend per share for present year