Compute the cost of equity with CAPM and the dividend growth model.
Please do not make financial decisions based on these results.
What is the Cost of Equity Calculator?
Compute the cost of equity with CAPM and the dividend growth model. To use the Cost of Equity Calculator, enter risk-free rate, beta, market return, next dividend, share price, dividend growth; it returns cost of equity (capm), cost of equity (dividend model), and shows them instantly as you type.
Valuing a stock step by step
Begin with the P/E ratio and PEG ratio to see what the market pays for earnings and growth. Then check quality with ROE and ROIC, and compare ROIC with the WACC.
For a second opinion, estimate intrinsic value with the Dividend Discount Model Calculator or the Graham Number Calculator, then compute the margin of safety against today’s price.
- Returns. EPS, EPS growth, dividend yield and payout ratio measure what shareholders earn.
- Risk. Beta, unlevered beta and portfolio beta measure sensitivity to the market.
- Position tools. Stock average, stock split and market cap calculators keep your records straight.
How to use the Cost of Equity Calculator
- Enter your numbers. The inputs are Risk-free rate (%), Beta, Market return (%), Next dividend ($), Share price ($), Dividend growth (%). Take price and share figures from the latest filing or quote. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Cost of equity (CAPM), and the cards below show Cost of equity (dividend model). Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the Cost of Equity Calculator using the default values shown in the calculator above:
Inputs
| Risk-free rate (%) | 4.2 |
|---|---|
| Beta | 1.1 |
| Market return (%) | 9.5 |
| Next dividend ($) | 2.2 |
| Share price ($) | 55 |
| Dividend growth (%) | 4 |
Results
| Cost of equity (CAPM) | 10.03% |
|---|---|
| Cost of equity (dividend model) | 8% |
With these inputs the calculator returns Cost of equity (CAPM): 10.03%. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Risk-free rate (%) from 4.2 to 5.04 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Cost of equity (CAPM) | 10.03% | 9.95% | -0.8% |
| Cost of equity (dividend model) | 8% | 8% | 0% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
What the results tell you
The results panel of the Cost of Equity Calculator reports Cost of equity (CAPM) and cost of equity (dividend model). Compare these figures while changing one input at a time, and use the related calculators below to look at the same situation from another angle.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
Which method should I use?
CAPM suits most companies; the dividend model suits stable dividend payers.
Which valuation ratio should I trust?
No single ratio is enough. Compare several multiples with the company’s own history and its industry peers.
Is a high dividend yield good?
Not automatically. A very high yield can signal a falling price or a dividend that may be cut.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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