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Assuming you use a "normal" font (i.e. a font where all the caps are the same height and none of them have descenders other than the Q) and start with an em size of 1, the correct way to calculate the em size of a drop cap is ((n-1)*L)+C where n is the number of lines you want the drop cap to take up; L is the line-height of the paragraph and C is the caps height of the paragraph font. If you don't know the caps height of your font, 0.7 is a good starting estimate. The drop cap should have a negative bottom margin = (M-1)*((L-1)/2) where M is the drop cap em size and L is line-height.
You should also make a negative adjustment to the right margin of the drop cap of (M-1)*w where M is the drop cap em size and w is the advance width of the drop cap letter.
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