Cost of equity Calculator

📊 Cost of Equity Calculator – Estimate Expected Returns with Confidence

Use our free Cost of Equity Calculator to determine the expected return required by investors for holding a company’s equity. Whether you’re a finance student, analyst, or startup founder, this tool helps you make smarter, data-backed investment decisions.

✅ What is Cost of Equity?

Cost of equity refers to the return a company must offer to convince investors to invest in its equity. It reflects the **risk and reward** associated with owning shares. The higher the risk, the higher the return expected.

🔍 Why Use a Cost of Equity Calculator?

✔️ To determine the return shareholders expect
✔️ To evaluate the financial health of a company
✔️ To compare the risk-adjusted return of different stocks
✔️ To calculate **WACC (Weighted Average Cost of Capital)**
✔️ To improve your startup pitch or business valuation models

📈 Common Formulas Used

1. Capital Asset Pricing Model (CAPM)

Cost of Equity = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate)

2. Dividend Discount Model (DDM)

Cost of Equity = (Dividend per Share / Price per Share) + Dividend Growth Rate

Our calculator supports both models depending on the input you provide. You don’t need to remember formulas—we handle that for you.

💼 Who Should Use This Calculator?

🎯 Investors & Traders evaluating potential returns
🎯 Financial Analysts working on valuation models
🎯 Business Owners preparing to raise capital
🎯 Students learning finance, economics, or accounting

💬 Frequently Asked Questions (FAQs)

Q: What is a good cost of equity?
A “good” cost of equity depends on industry risk. A stable company may have a COE of 6-9%, while startups and high-risk firms may exceed 15%.

Q: How do I find beta for the CAPM model?
Beta can be sourced from finance websites (e.g., Yahoo Finance, MarketWatch) or estimated using regression analysis against a market index.

Q: When should I use CAPM vs. DDM?
Use CAPM when beta and market risk premium are available. Use DDM if the company regularly pays dividends and has a stable growth rate.

Q: Is this calculator useful for startups?
Yes. While startups may not have dividend history or beta, assumptions can be made to estimate the cost of equity for pitching or valuation.

Q: Is it free?
Yes. Our cost of equity calculator is 100% free and requires no login.