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Valuation

Cost of Capital (WACC) Calculator

The discount rate is where more DCF valuations quietly go wrong than any other single input. This tool builds one properly: a bottom-up beta from a peer group (unlevered, then relevered at your own capital structure) for the cost of equity, and a synthetic credit rating from your interest coverage ratio for the cost of debt if you don't have one already — the same two techniques you'd use for a private company or a division that has no market price of its own.

Peer group betas

Each peer's beta reflects their leverage. Unlevering strips that out so the betas can be fairly averaged, then relevered below at your own target capital structure.

PeerBeta (levered)DebtEquityTax rate %Unlevered β

Cost of equity

Small, illiquid, or single-founder-dependent companies often carry an extra premium beyond what beta alone captures.

Cost of debt

Capital structure

Ideally the market value of debt and equity, not book value — book value of debt is a decent proxy, but book value of equity usually isn't.

Result

Cost of equity build-up

Cost of debt build-up

Why "bottom-up" beta beats regressing your own stock

The textbook way to get a beta is to regress a company's own stock returns against the market. In practice that estimate is often noisy — a couple of years of data, a few unusual quarters, and the number moves around more than the company's actual business risk did. It's also useless for a private company or a new division with no trading history at all.

The fix: take the betas of several comparable public companies, strip out each one's own leverage (unlever), average the results — business risk without financing risk — and then relever that average at your own capital structure. The betas of several peers, averaged, are far more stable than any single noisy regression, and the technique works even when your own company has never traded a day in its life.

Why the interest coverage ratio stands in for a credit rating

Cost of debt should reflect default risk, which shows up in real bond markets as a credit spread over the risk-free rate. Most private companies and smaller public ones don't have a rated bond to read that spread off directly — but the interest coverage ratio (EBIT ÷ interest expense) correlates closely with actual credit ratings, because it's measuring the same underlying thing: how comfortably a company's operating profit covers its debt payments. Mapping coverage to an approximate rating, then a rating to a typical spread, gets you a reasonable cost of debt without needing an actual bond outstanding.

The honest limitations

Every number here is an estimate built from other estimates — the equity risk premium in particular is genuinely debated among practitioners, and reasonable people use figures a percentage point or more apart. The synthetic rating spreads are illustrative, not a live market feed, and real spreads widen and narrow with credit-market conditions. Small changes in WACC compound into large changes in a DCF's output, so treat the number this tool gives you as the center of a reasonable range, not a precise fact — and stress-test your valuation across a spread of plausible WACCs using the sensitivity table in our DCF model.