K_e (Gordon)
- Created by
- Renato Passos, Eng. de Software
- Reviewed by
- Renato Passos, Eng. de Software
Last updated: Apr 18, 2026
Formula
Gordon
About this calculator
The K_e (Gordon) calculator is a financial tool that helps calculate a company's cost of equity. It uses the Gordon formula, which takes into account the relationship between dividend yield and expected dividend growth.
The formula used is K_e = D₁/P + g, where D₁ is the expected dividend in the next period, P is the current stock price, and g is the expected dividend growth rate. This calculator is useful for investors and financial analysts who need to evaluate a company's performance and make informed investment decisions.
The K_e (Gordon) calculator is particularly useful in cases of companies that pay regular dividends and have a stable growth history. However, it is essential to exercise caution when using this calculator, as it assumes that dividend growth will be constant and that the market is in equilibrium.
Furthermore, it is crucial to understand that the cost of equity is just one of the factors that influence a company's valuation. Other factors, such as the company's risk, market liquidity, and economic conditions, should also be considered when making investment decisions.
Frequently asked questions
What is the cost of equity?
The cost of equity is the return that shareholders expect to receive from their investments. It is calculated based on the company's risk and the expected return on investments.
How is the Gordon formula used?
The Gordon formula is used to calculate a company's cost of equity. It takes into account the expected dividend in the next period, the current stock price, and the expected dividend growth rate.
What are the main precautions when using the K_e (Gordon) calculator?
It is essential to exercise caution when using the K_e (Gordon) calculator, as it assumes that dividend growth will be constant and that the market is in equilibrium. Additionally, it is crucial to consider other factors that influence a company's valuation.
In what cases is the K_e (Gordon) calculator most useful?
The K_e (Gordon) calculator is particularly useful in cases of companies that pay regular dividends and have a stable growth history.
How can the K_e (Gordon) calculator be used in conjunction with other financial tools?
The K_e (Gordon) calculator can be used in conjunction with other financial tools, such as the present value calculator, to obtain a more comprehensive view of a company's valuation.