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Cost of equity calculator (CAPM & DDM)

The return shareholders expect, by both standard models. CAPM: Rf + β·(Rm − Rf), the risk-based approach. DDM (Gordon growth): D₁/P₀ + g, for dividend-paying stocks. Enter the inputs and it returns each estimate side by side — a key ingredient of the WACC.

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Enter Risk-free rate (%), Beta (β), Expected market return (%), Expected dividend D₁, Current stock price P₀, Dividend growth rate g (%) and the Cost of equity calculator (CAPM & DDM) works out Cost of equity — CAPM, Cost of equity — DDM straight away. For instance, with Risk-free rate (%) = 4.5, Beta (β) = 1.15, Expected market return (%) = 10, Expected dividend D₁ = $3.50, Current stock price P₀ = $145.00 and Dividend growth rate g (%) = 5 it returns Cost of equity — CAPM = 10.82% and Cost of equity — DDM = 7.41%.

How to use it

  1. Enter your values: Risk-free rate (%), Beta (β), Expected market return (%), Expected dividend D₁, Current stock price P₀, Dividend growth rate g (%).
  2. Read the result instantly: Cost of equity — CAPM, Cost of equity — DDM.

Frequently asked questions

How does the Cost of equity calculator (CAPM & DDM) work?

It takes Risk-free rate (%), Beta (β), Expected market return (%), Expected dividend D₁, Current stock price P₀ and Dividend growth rate g (%) and derives Cost of equity — CAPM and Cost of equity — DDM from them. The calculation is live as you type, so the result updates on every change.

Which values does the calculator ask for?

6 values: Risk-free rate (%), Beta (β), Expected market return (%), Expected dividend D₁ ($), Current stock price P₀ ($) and Dividend growth rate g (%). Nothing else is required — no account, no file upload.

What does a typical calculation look like?

With Risk-free rate (%) = 4.5, Beta (β) = 1.15, Expected market return (%) = 10, Expected dividend D₁ = $3.50, Current stock price P₀ = $145.00 and Dividend growth rate g (%) = 5, the calculator returns Cost of equity — CAPM = 10.82% and Cost of equity — DDM = 7.41%. Those figures come from running this exact tool, so you can reproduce them by entering the same values.

How much does the result change with different inputs?

It moves a lot. Using Risk-free rate (%) = 5, Beta (β) = 2.3, Expected market return (%) = 20, Expected dividend D₁ = $7.00, Current stock price P₀ = $290.00 and Dividend growth rate g (%) = 5.5 instead, Cost of equity — CAPM goes from 10.82% to 39.5% — which is why it is worth testing a few scenarios rather than trusting a single figure.

What does it give for smaller values?

Scaled down to Risk-free rate (%) = 4, Beta (β) = 0.55, Expected market return (%) = 5, Expected dividend D₁ = $1.75, Current stock price P₀ = $72.50 and Dividend growth rate g (%) = 4.5, Cost of equity — CAPM comes out at 4.55%. The relationship is worth checking at both ends before you rely on a single result.

When would I actually use this?

Comparing two investments that pay at different times, deciding whether a project clears its cost of capital, and sanity-checking a valuation someone else produced.

What is the most common mistake?

Trusting a valuation without asking what share of it comes from the terminal value. Past 70%, the answer is an assumption about the distant future dressed up as a calculation.

What is the difference between the Cost of equity calculator (CAPM & DDM) and the Fund expense ratio cost calculator?

This one returns Cost of equity — CAPM and Cost of equity — DDM; the Fund expense ratio cost calculator returns Annual fee and Total fees over period. That is the whole difference — open the one whose figure you need.

Is there a tool for the next step?

Cost of Living Calculator is the closest one after this: Find the equivalent salary you'd need in another city using cost-of-living indexes.

What else is worth having open alongside it?

Crypto DCA calculator and Crypto market cap calculator — they come up in the same task often enough to be worth a second tab.

Further reading

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