The cost of capital calculator takes cost of debt and cost of equity and returns cost of capital. It is built for quick answers, for checking somebody else’s arithmetic, and for the moments when a formula book is not within reach.
What Is the Cost of Capital Calculator?
The cost of capital calculator takes cost of debt and cost of equity and turns them into cost of capital.
It is the kind of calculation you would otherwise do on the back of an envelope: mechanical, repeatable and easy to get subtly wrong without noticing.
How the Cost of Capital Figure Is Built
Each result is calculated from the ones before it, so the working is fully visible. That matters when the answer is going to be quoted to somebody else and you need to be able to explain where it came from.
The figures are exactly as good as the assumptions underneath them. Check the rates, the periods and the tax treatment before you rely on the result.
Reading the Result Sensibly
A small change in an input can move the result by much more than you would expect, particularly where the calculation divides by one of the figures you supplied. That is worth understanding before you rely on a figure.
For anything that will be committed to, write the inputs down beside the result. A number you can reproduce is worth far more than one you cannot explain.
A Worked Example
Working through an example, with cost of debt set to 10, cost of equity set to 5, the calculator returns cost of capital of 15. Substitute your own figures and the same steps produce the same kind of answer.
Frequently Asked Questions
What do I need to work out cost of capital?
Enter cost of debt and cost of equity. The calculator then works through the relationship and reports cost of capital.
What does the cost of capital actually calculate?
It takes cost of debt and cost of equity and converts them into cost of capital using the standard relationship for this problem. Each step is applied in turn, so every output is traceable back to the numbers you typed in.
How should I enter cost of debt?
Use the value you actually have, in the unit shown next to the field. Enter every value in the same unit system. The calculator assumes the figures you supply are consistent, so it cannot correct a mistake that happens before the calculation starts.
Can I use this for a quick estimate as well as a precise answer?
Yes. The calculator is built for quick checks, so round your inputs to a sensible number of significant figures and the result will be just as useful. If you need more precision, keep the same method and add digits to the inputs rather than adjusting the method itself.
Does anything you type get stored?
No. The whole calculation runs inside your browser, and nothing you enter is uploaded, logged or sent anywhere.