Cost of Equity Calculator
Calculate exactly what return rate your shareholders demand. Utilize both CAPM (Capital Asset Pricing Model) and Gordon Growth Model methodologies.
Cost of Equity Calculator
Calculate exactly what return rate your shareholders demand. Utilize both CAPM (Capital Asset Pricing Model) and Gordon Growth Model methodologies.
How to Use Cost of Equity Calculator in 3 Easy Steps
1
Step 1
Select your valuation methodology: CAPM for most equities, DDM for strictly dividend-paying giants.
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Step 2
For CAPM: Define the macroeconomic Risk Free Rate, Market Premium, and assign the specific corporate Beta.
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Step 3
For DDM: Input the current market stock price alongside the projected infinite dividend scale.
Frequently Asked Questions
A Beta of precisely 1.0 means the stock moves identically in tandem with the overall stock market. If the S&P 500 drops 2%, the stock statistically drops 2%.
In severe bankruptcy and corporate liquidations, debt-holders (banks/bondholders) have supreme legal priority over assets. Equity shareholders are at the bottom of the hierarchy and usually lose everything. Because their risk is extreme, their demanded return is identically extreme.
It’s extremely difficult. Because private companies do not trade publicly, they possess no mathematical "Beta." Valuation experts must find a publicly traded "pure play proxy competitor," strip out its debt leverage, apply it to the private company, and then add a severe "Illiquidity Risk Premium."