📈 Cost of Equity Calculator
Estimate Re using CAPM
How to Use This Calculator
1
Enter rates
Provide risk-free rate, beta, and market risk premium (all in %).
2
Calculate
Click to compute the cost of equity.
3
Use in WACC
Apply Re in WACC or project evaluations.
Formula
Re = Rf + β × MRP
Example: Rf = 2%, β = 1.1, MRP = 6% → Re = 2 + 1.1 × 6 = 8.6%
About Cost of Equity
Cost of equity is the return required by shareholders. CAPM is the most common model using market risk and beta.
Tips
- Ensure inputs are consistent and forward-looking
- Use an appropriate market risk premium for your market
- Beta can be levered to match target capital structure
Frequently Asked Questions
Should I use historical or forward MRP?
Forward-looking market risk premiums are preferred when available.
What if beta is negative?
Then Re may be lower than Rf; interpret with caution for defensive assets.
Can I use DDM instead?
Yes, dividend discount models can also estimate Re when dividends are stable.