Tool · 11

WACC and Beta Workbench

Build a cost of capital from the parts: CAPM, a comparable company beta table with the unlevering shown row by row, and market value weights.

Market inputs

Risk-free rate

Ten-year Treasury. FRED series DGS10, updated daily and free.

Equity risk premium

Damodaran publishes an implied US premium each month at NYU Stern.

Comparable company betas

Observed betas mix business risk with the effect of each company's debt. Strip the debt out, take the median of what is left, and you have a measure of the business alone.

Walmart

Levered beta

Equity ($M)

Debt ($M)

Unlevered0.6980.72 / (1 + 0.75 x 0.042)

Costco

Levered beta

Equity ($M)

Debt ($M)

Unlevered0.8310.84 / (1 + 0.75 x 0.014)

Kroger

Levered beta

Equity ($M)

Debt ($M)

Unlevered0.4140.55 / (1 + 0.76 x 0.432)

Dollar General

Levered beta

Equity ($M)

Debt ($M)

Unlevered0.5470.62 / (1 + 0.77 x 0.173)

TJX

Levered beta

Equity ($M)

Debt ($M)

Unlevered0.8890.90 / (1 + 0.75 x 0.017)

Unlevered beta across the set

	Value
Median	0.698
Mean	0.676

Median rather than mean, because one comp with an odd capital structure should not move the answer. On a set this small the two rarely agree, and the gap is worth looking at.

Target capital structure

Market value of equity

Debt

Market value if the bonds trade, book value if they do not.

Tax rate

Pre-tax cost of debt

The yield its bonds trade at today, not the coupon it happens to pay.

Output

Read the topic

Read where each input comes from →