Cost of Equity Calculator

Written by Great Medico

Updated September 25, 2026 •2 min read

Share Print Save

Cost of Equity Calculator gives a compact way to test the financial relationship represented by its form. The goal is to keep the arithmetic transparent while you compare different input scenarios.

What this calculator does

Cost of Equity Calculator uses CAPM to estimate a model-based cost of equity from the risk-free rate, stock beta, and expected market return. It works from risk-free rate, beta, and expected market return. For Cost of Equity Calculator, that narrow input set is intentional: it lets you isolate the relationship being measured instead of blending in unstated forecasts.

How to use it

Fill in Risk-free rate, Beta, and Expected market return, using values from the same scenario. For Cost of Equity Calculator, enter percentage or rate fields on the scale displayed by the form rather than converting them to an unstated format. Before calculating, recheck Risk-free rate, Beta, Expected market return against the source numbers you intend to analyze.

How the calculation works

Cost of equity = risk-free rate + beta × (expected market return − risk-free rate). Using the same relevant values and formula should reproduce the Cost of Equity Calculator result independently. For Cost of Equity Calculator, when the output is extreme, first confirm the form values and units rather than assuming the calculation represents the intended scenario.

Example

With a 4% risk-free rate, beta of 1.2, and expected market return of 9%, CAPM gives 10%: 4% + 1.2 × 5%. For another Cost of Equity Calculator scenario, keep the same formula and replace only the displayed inputs you want to test.

How to interpret the result

The result can be used as a model-based required return or cost of equity benchmark. A higher beta or larger market risk premium raises the modeled return. Read the Cost of Equity Calculator output as the specific relationship calculated from the form, not as a complete investment or credit decision by itself.

Limitations and notes

CAPM depends on estimates of beta, the risk-free rate, and expected market return, and it compresses risk into one market-sensitivity factor. It does not guarantee future returns or capture company-specific, liquidity, size, or other risk premia. If you revisit Cost of Equity Calculator later, refresh the displayed inputs instead of carrying an old result forward.