What is a good cost of equity?

There is no single good number. A lower cost of equity is cheaper for the company, and a higher one means shareholders see more risk. For a large US company with average market risk, a 5% risk-free rate plus a 5% equity risk premium puts it near 10%.

Beta moves the figure up or down. At a beta of 0.8 the same inputs give 9%, at 1.2 they give 11%, and at 1.5 they give 12.5%. Small private companies often land at 15% or more once a size premium and a company-specific risk premium are added.

What matters more is whether the business earns above its cost of equity. Compare it with return on equity and use it as a hurdle rate for new projects. For the inputs behind these numbers, read the equity risk premium entry and the methodology page.