Equity Premium Calculator: calculate equity premium for your business. Formula, benchmarks, and practical tips included.
Cost of equity = Rf + β × ERP
Historical ERP: United States — approximately 4.5–5.5% above 10-year treasury yields over long run (Damodaran, 2024). United Kingdom — approximately 4.0–5.0%. Developed markets average — approximately 4.0–5.0%. Emerging markets — add 1–5% country risk premium on top of base ERP depending on sovereign risk.
Worked example: Risk-free rate 4.2%. Beta 1.2. ERP 5.0%. Cost of equity = 4.2% + 1.2 × 5.0% = 10.2%.