Work out cost of equity instantly with clear inputs, formula shown and shareable results.
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.
Build-up cost of equity
kₑ = r_f + β×ERP + size/specific premium
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.
Smaller companies have historically delivered higher returns than beta alone predicts, and they carry greater illiquidity.
The multiple justified by a business with no growth — the reciprocal of the cost of equity, a fast sanity check.