The CAPM cost of equity for Deutsche Telekom AG at 2026-06-30. A practitioner reference for equity-only discount rates — dividend discount models, residual-income frameworks, and the Ke input in enterprise-value DCFs. Sourced inputs, transparent walkthrough, refreshed quarterly.
| Component | Value | Source / Assumption |
|---|---|---|
| Risk-free rate (Rf) | 4.25% | 10-year US Treasury yield at snapshot date |
| Beta (β) | 0.75 | 5-year weekly regression vs S&P 500, Blume-adjusted |
| Equity risk premium (ERP) | 5.55% | Damodaran implied ERP, June 2026 update |
| Cost of Equity (Ke) | 8.60% | CAPM: Rf + β × ERP = 4.25% + 0.75 × 5.55% |
CAPM is the practitioner default because it's defensible in a boardroom in one line. But the Fama-French three-factor model adds a size premium (SMB) and a value premium (HML) that meaningfully improve fit on empirical returns. For Deutsche Telekom AG, the illustrative FF3 cost of equity is:
| Factor | Loading | Premium | Contribution |
|---|---|---|---|
| Market (Rm − Rf) | 0.75 | 5.55% | 4.16% |
| Size (SMB) — illustrative loading 0.20 | 0.20 | 1.10% | 0.22% |
| Value (HML) — illustrative loading 0.15 | 0.15 | 1.85% | 0.28% |
| Risk-free base | — | — | 4.25% |
| Fama-French Ke | — | — | 8.91% |
Practitioner note: the SMB and HML loadings above are illustrative reference values. For a defensible FF3 estimate, run a five-year monthly regression against the Fama-French factor series and use the empirical loadings. FF3 typically shifts Ke by 30-90 bps versus CAPM for large-cap issuers — enough to matter, not enough to change the recommendation on most valuations.
The published beta of 0.75 reflects Deutsche Telekom AG's current capital structure. Practitioners doing peer-based valuation (or a re-lever for a target capital structure) should decompose:
| Step | Value | Formula |
|---|---|---|
| Observed (levered) beta | 0.75 | 5-yr weekly regression, Blume-adjusted |
| Assumed D/E | 0.15 | Market values from the companion WACC page |
| Assumed tax rate | 21% | Blended federal + state |
| Unlevered beta (asset beta) | 0.67 | βL / [1 + (1 − t) × D/E] |
Use the unlevered beta when the peer's capital structure differs materially from the target's. Re-lever at the target D/E before feeding back into CAPM.
Cost of equity for Deutsche Telekom AG at various beta and ERP combinations (risk-free rate held at 4.25%):
| Beta \ ERP | 4.75% | 5.25% | 5.55% | 5.85% | 6.35% |
|---|---|---|---|---|---|
| 0.55 | 6.86% | 7.14% | 7.30% | 7.47% | 7.74% |
| 0.65 | 7.34% | 7.66% | 7.86% | 8.05% | 8.38% |
| 0.75 | 7.81% | 8.19% | 8.41% | 8.64% | 9.01% |
| 0.85 | 8.29% | 8.71% | 8.97% | 9.22% | 9.65% |
| 0.95 | 8.76% | 9.24% | 9.52% | 9.81% | 10.28% |
A cost of equity of 8.60% is the equity-only discount rate to plug into a dividend discount model, a residual-income model, or any framework that discounts flows accruing solely to equityholders. If you're building an enterprise-value DCF, use the companion WACC of 6.2% instead — Ke feeds into WACC through the equity weight, but is not itself the enterprise discount rate.
For Deutsche Telekom AG specifically, the beta of 0.75 anchors the calculation. Where practitioners will reasonably disagree: whether to use a raw historical beta, a Blume-adjusted beta (the Baratelli reference default), or an industry-median beta. Blume-adjusted pulls the estimate toward 1.0 on the theory that betas revert over long horizons; industry-median smooths noise for issuers with thin trading history. All three are defensible; the recommendation is to disclose which convention you're using and hold it constant across peer comparisons.
On Damodaran ERP: the 5.55% ERP is the June 2026 implied premium from Damodaran's monthly update — the defensible reference across the practitioner community. Historical arithmetic-average ERPs (7%+) overstate today's premium; historical geometric averages (5.0-5.5%) triangulate close to the implied number.
The full cost-of-equity walkthrough, the FF3 template, and 25 other Wall Street models are in the Baratelli Financial Modeling Toolkit — $99.
All 73 companies in the Baratelli Cost of Equity reference: The full Cost of Equity Reference Library (73 companies) — sorted, filterable.
Companion WACC calculation: The DTE.DE WACC reference — adds after-tax cost of debt and capital-structure weighting.
DCF methodology hub: The Baratelli DCF Reference — where Ke and WACC actually get used.
Interactive calculator: The WACC + Cost of Equity calculator — substitute your own inputs.