Cost of Equity Calculator

The cost of equity is the return shareholders need before they will hold the shares, and there is no single correct way to measure it. This runs three of them: CAPM from a risk-free rate, beta and a market risk premium; the dividend growth model from the price, the dividend and the growth you expect; and the company's own bond yield plus an equity premium. The cross-check action runs all three at once and reports the spread, along with what each rate says the share is worth. Every figure is one you enter, so no rate, beta or premium embedded in the page can go stale and quietly decide the answer.

Calculator Type

The capital asset pricing model: a risk-free rate plus beta times the market risk premium.

Usually the yield on a government bond of similar life to the cash flows you are discounting.
The excess return you expect from the market over the risk-free rate, not the expected market return itself.
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The Gordon growth model read backwards: the return the current share price implies, given the dividend and the growth you expect.

Only for new shares being issued. Leave it at zero for equity already outstanding.
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CAPM, the dividend growth model and a bond yield plus a premium, run on the same company at the same time. They will not agree.

The usual rule of thumb is three to five points. It is a judgement, not a measurement.
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