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A systematic and iterative method of computing the capacity of arbitrary discrete memoryless channels is presented. The algorithm is very simple and involves only logarithms and exponentials in addition to elementary arithmetical operations. It has also the property of monotonic convergence to the capacity. In general, the approximation error is at least inversely proportional to the number of iterations; in certain circumstances, it is exponentially decreasing. Finally, a few inequalities that give upper and lower bounds on the capacity are derived.