Estimate the cost of equity as the risk-free rate plus beta times the market risk premium.
| Cost of equity (%) | – |
Use this CAPM calculator for a cost-of-equity building block in a WACC or DCF. The market input is the expected market return, not the premium: the premium is Rm − Rf.
Re = Rf + β × (Rm − Rf). Type percents as you would quote them (3 for 3%). Beta can be above or below 1. This is the textbook single-factor CAPM, not Fama–French.
Risk-free (%): Yield on a matching-horizon government bond, as a percent.
β: Equity beta versus the market you used for Rm.
Market return (%): Expected total return of that market, as a percent.
Cost of equity (%): Re as a percent.
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