Overview
The cost of equity is the expected (in the statistical sense) rate of return that equity holders demand from a company in order to justify its current price. If the return is higher than the cost of equity, the share price is exptected to rise, and if lower, it is exptected to decrease.
The cost of equity is typically justified and calculated using the Capital Asset Pricing Model and inlcuded in the weighted average cost of capital used to in corporate valuation.