Learn how to calculate the cost of equity in Microsoft Excel using the capital asset pricing model, or CAPM, including brief definitions of each component.

The capital asset pricing model (CAPM) can help you evaluate a stock's potential for reward within the context of its inherent risk.

Launch Excel and create a new, blank spreadsheet. Type "Securities" in cell A1, "Rate of Return" in B1, "Beta" in C1 and "CAPM" in cell D1. Type "Risk-free" in cell A2, "Market" in A3 and "Stock ...