Cost of Equity Calculator

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CAPM is the most widely used method. DDM suits dividend-paying stocks. Bond + RP suits firms with comparable bond data. Weighted blends all three with custom weights.
Typically the yield on a 10-year government bond in the relevant currency (e.g. US Treasury, UK Gilt). As of mid-2026, the US 10-year Treasury yield is around 4.2-4.7%.
%
The sensitivity of the stock to the market. A beta of 1.0 means the stock moves in line with the market; above 1.0 means more volatile; below 1.0 means less volatile. Beta can be found on financial data sites such as Yahoo Finance or Bloomberg.
The long-run expected annual return of the broad equity market (e.g. S&P 500). A common assumption is 7-10% per year in nominal terms.
%
Cost of equityHigh cost of equity
10%

The minimum return required by equity investors

Equity risk premium5%
Beta contribution5.5%
10% %
Low<6Moderate6-10High10-15Very High15+

Cost of equity: 10.00% (CAPM)

  • The risk-free rate contributes 4.50% and the beta-adjusted risk premium adds 5.50%.
  • A beta of 1.10 is close to 1.0, meaning the stock moves broadly in line with the market.
  • A cost of equity of 10.00% is used as the discount rate for equity cash flows in DCF valuations and as an input to WACC.

Next stepUse this figure as the equity component in a WACC calculation, weighting it by the proportion of equity in the capital structure.

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