The Cost of Equity Formula - Investment Banking Interview Qs

In this video, we cover the Cost of Equity Formula. Questions about the Cost of Equity formula are super common in Investment Banking Interviews. The Cost of Equity Concept is often taught purely as a formula, which causes tremendous confusion. Here, we walk through the concept behind the Cost of Equity and explain the concept of each component of the formula in plain English.
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Learn how to answer interview questions from a former Investment Banking (UBS LA), Private Equity (Golden Gate Capital + HIG Capital) and Investment Management ($200B Mutual Fund / $2B Hedge Fund) practitioner…and Adjunct Professor in Columbia Business School’s Value Investing Program who has trained thousands of current IB/PE/HF/MF professionals.
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00:00 - Intro
00:09 - Video Context & Overview
00:22 - Cost of Equity Concept Review
00:57 - The Capital Asset Pricing Model
01:21 - The Cost of Equity Formula Build
01:46 - Cost of Equity Concept Recap
02:04 - The Risk-Free Rate (the ‘Baseline’)
03:08 - Equity Risk Premium (the ‘Reward’)
04:53 - Beta (the ‘Risk’ number)
07:07 - Cost of Equity Formula…in Action!
08:27 - How to Answer this Question in an Interview
09:11 - Wrap-Up
Hope this is helpful and let us know if you have any questions in the comment section below.
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[@FinanceableTraining]

Aiming for Investment Banking, Private Equity, or Investment Management Roles? Ramp up faster with our (free) Finance Analyst Starter Kit! - finance-able.com/analyst-starter-kit/

[@rossgai8630]

Really helpful. Thank you so much !

[@enemyonscythe]

Great video!