Cost of equity and WACC calculator
Work out a discount rate for a valuation from the risk-free rate, beta and equity risk premium, then blend in debt to get the WACC.
Enter the numbers on the left and press Calculate to see the result here.
How it works
The cost of equity is the return owners expect. The WACC blends it with the after-tax cost of debt, weighted by how the business is funded. Analysts often use the WACC as the discount rate in a DCF valuation.
Cost of equity = Risk-free rate + Beta x Equity risk premium + Country risk premium
WACC = E/(D+E) x Cost of equity + D/(D+E) x Cost of debt x (1 - tax rate)
Worked example
A risk-free rate of 4.0%, a beta of 1.1 and an equity risk premium of 5.0% give a cost of equity of 9.5%. With equity of 700, debt of 300, a 6.0% cost of debt and a 20% tax rate, the WACC is 8.09%.
Where to find the inputs
Use a government bond yield in the same currency as your cash flows for the risk-free rate. Betas by industry are published by Professor Damodaran, with global, Europe, India and emerging-market versions. His site also has equity and country risk premiums and costs of capital by sector. See the links on this page and on our data sources page. Methods differ on how to treat country risk, so check what suits your case.
Important limitations: please read
Cost of equity and WACC depend on judgement: which beta, which risk premium, which debt level and how to treat country risk. Different reasonable choices give different answers. Use the result as a starting point and test how sensitive your valuation is to it. The calculator uses no live market data.
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