‘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:

**R _{j} = R_{f }+ β(R_{m} – R_{f})**

## Cost of Equity CAPM Model Calculator

## How to Calculate Using Calculator?

**R _{j} **= Cost of Equity / Required Rate of Return

**R _{f }**= 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 _{m }**= 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 R_{m.}