This paper presents a method for calculation of the cost of capital for farm firms from income tax records and supplementary information. While data were only available for one year, the model developed in this paper could be applied in a farm management context for time series information. Specific objectives of this paper include: (1) theoretical identification of the type of data needed to calculate the cost of capital for a farm firm, (2) illustration of the estimation procedure for case farms, and (3) presentation of some aggregate estimates of the cost of capital.