Cost of equity calculator
Estimate the return shareholders expect from a stock using the capital asset pricing model (CAPM). Enter a risk-free rate, the stock's beta and a market risk premium.
- Risk-free rate
- 4.90%
- Beta
- 1.10
- Risk premium
- 5.00%
- Market return
- 9.90%
Use it as the cost of equity in a WACC calculation or as a discount rate in a DCF.
Pull a live beta and today's 10-year Treasury yield into Google Sheets or Excel, then keep the calculation next to your model.
=SF("AAPL","profile","beta")=SF_CALENDAR("","treasury",TODAY()-7,TODAY(),"date&year10")How the cost of equity is calculated
The calculator uses the capital asset pricing model, the most common way to estimate the return investors need before they'll hold a stock. It adds a reward for market risk, scaled by the stock's beta, to the return on a risk-free investment.
Risk-free rate
Most analysts use the yield on a 10-year government bond in the same currency as the company's cash flows: US Treasuries for a US stock, gilts for a UK one, Commonwealth bonds for an Australian one.
Beta
Beta measures how much a stock's returns move with the market. A beta of 1.3 means the stock has historically moved about 30% more than the market in either direction, so investors want a bigger premium for holding it. Betas are usually measured over five years of monthly returns.
Equity risk premium
This is the extra return investors expect from stocks over the risk-free rate. Estimates based on long-run history and current valuations mostly sit between 4% and 6% for the US. Switch to Market return if you'd rather enter an expected market return and let the calculator work out the premium.
Worked example
With a 4.9% risk-free rate (roughly the US 10-year Treasury yield in November 2026), a beta of 1.10 and a 5% equity risk premium, the cost of equity is 4.9% + 1.10 × 5% = 10.4%. A company has to earn at least that on its equity, over time, to reward its shareholders for the risk.
Frequently asked questions
What is a good cost of equity?
There isn't a good or bad figure: it reflects risk. Large, stable companies often come out between 7% and 9%, while smaller or more volatile companies can be 12% or more. A higher cost of equity means investors want more return to hold the stock.
Where do I find a stock's beta?
Beta is published on most financial data sites and in SheetsFinance with =SF("AAPL","profile","beta"). Check the period it's measured over, because betas calculated over different windows can differ a lot.
What's the difference between cost of equity and WACC?
The cost of equity is the return shareholders expect. WACC blends it with the after-tax cost of debt, weighted by how much of the company is funded by each. Use the WACC to discount cash flows to the whole firm and the cost of equity to discount cash flows to shareholders.
Can the cost of equity be lower than the risk-free rate?
Only if beta is negative, which is rare. For almost every stock the cost of equity sits above the risk-free rate, because investors expect to be paid for taking on market risk.
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