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explain the dividend growth model and cost of equity

explain the dividend growth model and cost of equity
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Answer : Dividend Growth Model is one of the method for estimating Cost of Equity.Basically Cost of Equity is the return expected by the shareholder in return of the funds or capital invested by them in the corporation.Dividedn Growth Model uses Expected Dividend and Price of the share as a base to calculate Cost of Equity.Cost of Equity under Dividend Growth Model can be calculated as :

Cost of Equity = [Expected Dividend / Share Price] + Growth Rate

The data of the variables used in the formula are available with the company.Therefore Dividedn Growth Model is one of the commonly used measure to calculate cost of Equity.

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