CAPM Cost of Equity Calculator
What is my cost of equity (Ke) using the Capital Asset Pricing Model adjusted for Indian sovereign yields and SME size premiums?
Financial Inputs
Yield on 10-Year Indian Sovereign Government Securities (G-Sec).
Sensitivity of firm returns relative to broader market index (1.0 = market benchmark).
Expected excess return of equities over risk-free government bonds in India.
Additional return demanded by investors for smaller unlisted corporate scale and lower liquidity.
Cost of Equity (Ke)
B
Systematic Risk Premium
8.05
Expected Market Return (Rm)
14.1
Key Financial Takeaways
- Based on India 10-Yr G-Sec yield of 7.1% and an equity beta of 1.15, the required Cost of Equity is 18.65% (including 3.5% SME size premium). Investors require this baseline return to compensate for operational and systematic risk.
Frequently Asked Questions
Why do unlisted Indian SMEs require a size premium in CAPM?
Classical CAPM assumes perfect liquidity in public stock exchanges. Unlisted SMEs face illiquidity, higher customer concentration, key-person dependency, and limited access to capital markets, requiring an additional 3% to 5% size premium in DCF valuations.
Calculators on this platform provide indicative mathematical estimations based on industry-standard financial appraisal models (including Tandon Committee Method II, Nayak Turnover Method, and standard compound amortisation).
They do not constitute a formal facility sanction, credit commitment, or legal advisory from SME PAISA or any partner banking/NBFC institution. Final terms, interest margins, security stipulations, and credit sanctions remain strictly subject to formal credit appraisal, audited balance sheet verification, CMA Data assessment, and risk committee approval by institutional lenders.
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