Free · Equity investment calculators 📈

CAPM & Dividend Growth Equity Cost Calculator

Estimate equity return assumptions using beta or a constant dividend-growth model.

  • Formula & worked example
  • Private in your browser
  • No signup
Go to tool

Calculator inputs

Loading calculator…

How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Edit a calculated value to solve backwards, or lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

With a 3% risk-free rate, 8% market return and beta 1.2, CAPM gives 9%. In dividend mode, a next-period dividend of 2 on a share price of 40 plus 5% constant growth gives 10%.

CAPM: equity cost = risk-free rate + beta × (market return − risk-free rate). Dividend growth: equity cost = next-period dividend ÷ share price + growth rate.

Worked example

Enter these known values and leave the other values blank.

Does the company pay a dividend?
No
Risk free rate of return
3 %
Market rate of return
8 %
Beta
1.2
Cost of equity
9 %

Assumptions and limitations

  • Use the expected dividend for the next period and a growth rate consistent with that period. The model assumes a stable continuing growth pattern. CAPM depends on the chosen risk-free reference, market return and beta; neither method promises a realized return.
  • Use consistent periods, rates and accounting definitions. These calculations describe the entered assumptions.

Common questions

Which dividend belongs in the growth model?

Use the expected dividend for the next period and a growth rate consistent with that period. The model assumes a stable continuing growth pattern. CAPM depends on the chosen risk-free reference, market return and beta; neither method promises a realized return.

References

The calculation equations, inverse formulas, units, and input rules were imported from this source. Bookify provides the interface and equation solver.

Explore equity investment calculators 📈 or browse all finance calculators.