Required equity return via CAPM. The Cost of Equity (CAPM) Calculator takes risk-free rate (government bond yield), beta of the company or sector, expected market return and returns cost of equity (capm) plus equity risk premium, premium for this stock over the market. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Investment maths is about comparing money at different points in time on a fair basis. Compound rates, discounting and annualised returns let you compare options of different sizes and durations. Use the worked example below to check the maths against your own figures.
How the Cost of Equity (CAPM) Calculator works
CAPM says investors need the risk-free return plus a premium scaled by how volatile the stock is relative to the market. It is the equity input to WACC.
Worked example
With the example values (risk-free rate (government bond yield) of 7%, beta of the company or sector of 1.2, expected market return of 12%), the cost of equity (capm) is 13%; equity risk premium 5%, premium for this stock over the market 1%. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
Related Calculators
Frequently Asked Questions
How is cost of equity (capm) calculated?
cost of equity = risk-free rate + beta × (market return − risk-free rate).
Which figures do I need?
Risk-free rate (government bond yield), beta of the company or sector, expected market return. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
Does the calculator account for taxes and fees?
Only where there is an input for them. For a true net return, add fees and taxes to your inputs or use the stock and crypto profit calculators, which include them.
