# Cost of Equity (CAPM Model) Calculator

Cost of Equity Calculator (CAPM Model)’ calculates the cost of equity for a company using the formula stated in the Capital Asset Pricing Model.

The cost of equity is the perceptional cost of investing equity capital in a business. Interest is the cost of utilizing borrowed money. For equity, there is no such direct cost available. Therefore, it is calculated based on the general principle of the risk-return trade-off.

The formula for calculating the cost of equity as per the CAPM model is as follows:

Rj = R+ β(Rm – Rf)

## How to Calculate Using Calculator?

Rj = Cost of Equity / Required Rate of Return

R= Risk-free Rate of Return. Generally, it is the government’s treasury interest rate. We call it risk-free based on the premise that the government will never default on its financial commitments.

R= Expected Return from Market Portfolio. It is the expected return from an imaginary portfolio of shares where all the shares existing in the market are purchased in the ratio of the market capitalization of each.

β = Beta. It is the measure of risk. It represents the change in return of a particular company in response to a change in the Rm.

## Excel Calculator – Cost of Equity (CAPM Model)

You can also download our excel based calculator for cost of equity (capm model)

Excel Calculator for Cost of Equity(CAPM Model) (216 downloads )

## Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.