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Cost Of Equity Calculator

Work out cost of equity instantly with clear inputs, formula shown and shareable results.

About Cost Of Equity Calculator

The cost of equity is the return shareholders require. Build-up methods start from CAPM and add premiums for small size or company-specific risk, which is standard practice when valuing private or illiquid businesses.

Formula

Build-up cost of equity

kₑ = r_f + β×ERP + size/specific premium

Worked example

With the default values below, Cost Of Equity Calculator returns Cost Of Equity of 14.550%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Risk-Free Rateaccepts 0–100 %
7 %
Betaaccepts -3–5
1.1
Equity Risk Premiumaccepts 0–15 %
5.5 %
Size Or Specific Premiumaccepts 0–10 %
1.5 %

Results

Cost Of Equity
14.550%
CAPM Base Cost
13.050%
Size Or Specific Premium Added
1.500%
No-Growth Price To Earnings At This Cost
6.87

Step by step

  1. 1Values used
  2. 2Build-up cost of equity
  3. 3Cost Of Equity= 14.550
  4. 4CAPM Base Cost= 13.050
  5. 5Size Or Specific Premium Added= 1.500
  6. 6No-Growth Price To Earnings At This Cost= 6.87

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

Why add a size premium?

Smaller companies have historically delivered higher returns than beta alone predicts, and they carry greater illiquidity.

What does the implied P/E show?

The multiple justified by a business with no growth — the reciprocal of the cost of equity, a fast sanity check.

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