Cost of Equity Calculator
Estimate the cost of equity with CAPM from the risk-free rate, beta, and expected market return.
What this calculator does
The Cost of Equity Calculator estimates your result instantly from the values you enter, using standard investing & wealth formulas. Estimate the cost of equity with CAPM from the risk-free rate, beta, and expected market return. Calculations run in your browser, so nothing you type is sent to a server, and the output is an estimate for planning rather than financial advice.
Result
About Cost of Equity Calculator
The Cost of Equity Calculator estimates the return shareholders require to hold a company's stock, using the Capital Asset Pricing Model. From the risk-free rate, the stock's beta, and the expected market return, it adds the risk-free rate to beta times the market risk premium.
Cost of equity is a central input to company valuation and to the weighted average cost of capital, because it is the return equity investors demand for bearing the stock's market risk. This tool applies the CAPM relationship directly to the three figures you supply.
Enter the risk-free rate, the beta, and the expected market return, press Calculate, and read the cost of equity the model implies.
Formula & Mathematical Calculation
Cost of Equity = Risk-Free Rate + Beta × ( Expected Market Return − Risk-Free Rate )
Calculation Example
With a 4% risk-free rate, a beta of 1.2, and a 10% expected market return, the cost of equity is 4% + 1.2 × (10% − 4%) = 11.2%.
Key Benefits
- Estimates the return shareholders require for the stock's market risk.
- Applies the CAPM relationship directly from the three figures you enter.
- Produces a key input for company valuation and the cost of capital.
- Scales the market risk premium by beta to fit the specific company.
How to Use this Calculator
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Enter the risk-free rate
Type the risk-free rate as a percentage in the Risk-Free Rate field, for example 4. -
Enter the beta
Type the stock's beta in the Beta field, for example 1.2. -
Enter the expected market return
Type the expected market return as a percentage in the Expected Market Return field, for example 10. -
Press Calculate
The tool adds the risk-free rate to beta times the market risk premium to return the cost of equity.
Assumptions & Limitations
What the calculation assumes
- Every value you enter is treated as an exact, known amount.
- Rates and contributions are assumed to stay constant for the whole period unless the form asks for them separately.
- Results use standard financial formulas and ignore fees, penalties and promotional terms that are not entered above.
- Inflation, tax changes and market volatility are not modelled unless a field for them is provided.
- Amounts are unit-agnostic: results are returned in the same currency you enter.
What it does not cover
- Cost of Equity Calculator produces estimates for education and planning, not a quote, offer or professional advice.
- Real-world outcomes differ when fees, taxes, rounding rules or provider-specific terms apply.
- Local regulations and tax rules vary by country and change over time; verify current rules for your jurisdiction.
- Figures are only as accurate as the inputs you supply — check them before acting on the result.
- For decisions with lasting financial impact, confirm the numbers with a qualified professional.
Frequently Asked Questions
Free to use, no account needed. Calculations run in your browser, so nothing you type is sent to a server. Results are estimates — how we build and check our calculators.
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