Accounting Share · Interest, loans & valuation

CAPM Cost of Equity Calculator

Estimate a required equity return from a risk-free rate, a market-risk premium and an equity beta under the CAPM framework.

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03 / Understand the method

Formula and method

Cost of equity = Risk-free rate + Beta × (Market return − Risk-free rate)

Estimate a required equity return from a risk-free rate, a market-risk premium and an equity beta under the CAPM framework.

How to use this calculator

  1. Collect the figures for the same entity, currency and reporting period.
  2. Enter each input using its label and unit. For percentages, enter 15 to mean 15%.
  3. Choose Calculate, inspect the breakdown and compare the result with your assumptions.
  4. Change one input to explore a scenario. Recalculate after edits; display rounding does not round the underlying calculation.

Inputs at a glance

  • Risk-free rate (%): May be positive, zero or negative; the sign changes its effect in the displayed formula.
  • Equity beta: May be positive, zero or negative; the sign changes its effect in the displayed formula.
  • Expected market return (%): May be positive, zero or negative; the sign changes its effect in the displayed formula.

Worked example

Follow one calculation.

Risk-free rate (%)
4
Equity beta
1.2
Expected market return (%)
9
Calculated result
10%

Load this example in the interactive form to inspect the intermediate amounts.

Assumptions and interpretation

Inputs are assumptions and estimates, not promised returns. Match currency, horizon and leverage assumptions; CAPM does not capture every source of risk.

The output is a model based on the figures entered. Check source records and use the accounting or contractual definitions relevant to your task before relying on a result.

Questions about this tool

What does the capm cost of equity calculation measure?

Estimate a required equity return from a risk-free rate, a market-risk premium and an equity beta under the CAPM framework.

Which assumptions can change the result?

Inputs are assumptions and estimates, not promised returns. Match currency, horizon and leverage assumptions; CAPM does not capture every source of risk.

Why can displayed totals differ slightly from my spreadsheet?

Calculations use the unrounded input values. Only the display is rounded. Use four or six decimal places to inspect small differences, and check the timing, sign conventions and rounding policy in your spreadsheet.

Reference and further learning

Time value of money and loans. These original learning examples apply the displayed formula; the reference does not certify or endorse this calculator.

Look up an accounting term · Practise with accounting questions

Formula and worked example checked 4 November 2026. Calculations run in your browser without sending the entered figures to Accounting Share. Report a calculation issue with the tool name, example inputs and expected result; avoid sharing confidential records.

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