Abstract:

Paper deals with the issue of the cost of equity quantification. It mainly focuses on the possibilities of their quantification in an inefficient capital market. The main aim of the paper is to identify and compute methods of the cost of equity quantification under the conditions of an inefficient capital market. Paper provides theoretical aspects of chosen methods of the cost of equity quantification. Paper mainly focuses on the two basic methods for the cost of equity quantification, namely: Capital Assets Pricing Model (CAPM) and Build-up method. In addition, paper quantifies the cost of equity in the sample of companies. As an inefficient capital market paper uses capital market of Slovak Republic and paper quantifies the cost of equity in Slovak companies. The elementary database for computations in paper is composed of the financial statements of 300 Slovak companies in 2016. Subsequently, paper compares result of chosen methods of the cost of equity quantification and captures the volatility of their results under the condition of an inefficient capital market.