What is a Good WACC Percentage? Industry Benchmarks

There Is No Universal "Good" WACC

The most important thing to understand about WACC is that there is no single number that is "good" or "bad" in isolation. A 12% WACC might be excellent for a high-growth technology company and dangerously high for a regulated utility. What matters is context: the industry, the company size, the prevailing interest rate environment, and most importantly — whether the company's return on invested capital exceeds its WACC.

That said, benchmarks are genuinely useful for sanity-checking your calculation, framing investment decisions, and understanding whether a business is efficiently financed. Here is a practical guide.

WACC Ranges by Level

4–8%

Low WACC — Excellent

Typical of regulated utilities, large REITs, infrastructure companies, and investment-grade consumer staples. These businesses have stable, predictable cash flows and carry substantial debt at low interest rates. A 4–8% WACC means even modest returns create significant value. Most S&P 500 utilities and pipeline companies fall here.

8–12%

Moderate WACC — Normal for Large Corporates

The typical range for large, investment-grade S&P 500 companies — industrials, healthcare, financial services, and large-cap consumer companies. This is considered a healthy, well-managed cost of capital. Companies in this range must generate solid but achievable returns to create value. Most DCF models for blue-chip companies use discount rates in this range.

12–18%

Higher WACC — Growth Companies and Mid-Market

Common for mid-size companies, growth-oriented businesses, technology companies, and highly leveraged firms. Higher beta (market sensitivity), less debt capacity, and greater operational uncertainty push WACC into this range. For private mid-market companies, this range is entirely normal and expected given size and illiquidity premiums.

18%+

High WACC — Small Business, Startups, Distressed

Reflects significant risk: small private businesses, early-stage startups, highly leveraged companies, or businesses in distress. Venture capital investments are typically evaluated at 20–40%+ WACC. At this level, only high-return projects and investments justify capital allocation. Private company valuations in M&A transactions routinely use discount rates in this range for smaller deals.

WACC Benchmarks by Industry

Industry is the single biggest driver of WACC variation. Capital-intensive, regulated, or stable-cash-flow industries tend to have low WACC. High-growth, high-beta, or cyclical industries tend to have higher WACC. The table below shows approximate WACC ranges for major sectors based on typical capital structures and risk profiles.

Industry / Sector	Typical WACC Range	Key Driver
Utilities (Electric, Gas, Water)	4–7%	Regulated revenues, heavy debt usage, low beta
Real Estate / REITs	5–8%	Stable property income, high leverage, preferred stock
Telecommunications	6–9%	Recurring subscription revenues, high infrastructure debt
Consumer Staples (Food, Beverages)	6–9%	Low beta, stable demand, strong balance sheets
Healthcare (Hospitals, Devices)	7–11%	Moderate beta, stable but regulated revenues
Financial Services (Banks)	8–12%	Capital requirements, rate sensitivity, regulatory risk
Industrials (Manufacturing)	8–12%	Cyclical revenues, moderate beta, leverage varies
Consumer Discretionary (Retail)	9–13%	Cyclical demand, competitive pressure, moderate leverage
Technology (Software, SaaS)	9–14%	High beta, low debt (often), high equity cost due to growth risk
Energy (Oil & Gas)	10–14%	Commodity price volatility, capital intensity, high beta
Biotech / Pharma (R&D Stage)	12–20%	Binary clinical outcomes, high equity risk, minimal debt
Private Mid-Market Companies	14–22%	Size premium, illiquidity, company-specific risk
Early-Stage / Startups	25–50%+	High failure risk, no established cash flows, VC return expectations

What Drives WACC Higher or Lower?

Interest rate environment. WACC is directly sensitive to interest rates. When the Federal Reserve raises rates, the risk-free rate rises, which flows through to both the cost of equity (via CAPM) and the cost of debt. The rate hiking cycle of 2022–2023 raised WACC across all sectors by 1–3 percentage points compared to the near-zero rate era of 2020–2021.

Capital structure — leverage. Adding more debt to a capital structure lowers WACC (up to a point), because after-tax debt is cheaper than equity. This is why utilities and infrastructure companies, which carry very high debt loads, have low WACCs. However, too much debt increases financial risk, which raises both the cost of equity and the cost of debt — eventually pushing WACC back up.

Beta / Market risk. Companies in cyclical, volatile, or high-growth industries have higher betas, which means investors demand a higher return on equity, which raises WACC. A company with a Beta of 1.5 will have a significantly higher cost of equity than one with a Beta of 0.6, even with identical capital structures.

Company size. Smaller companies have higher WACC for two reasons. First, smaller companies typically have higher betas (more volatile). Second, they face a size premium — academic research consistently shows that investors demand higher returns for small-company investments beyond what beta alone predicts.

Credit quality / cost of debt. An investment-grade company (BBB or above) might borrow at 5%. A high-yield (BB or below) company might borrow at 9–10%. This difference in credit spread directly increases WACC for lower-rated businesses.

Tax rate. The corporate tax rate determines the size of the debt tax shield. A higher tax rate makes debt cheaper on an after-tax basis, which lowers WACC. This is one reason why the 2017 US corporate tax cut from 35% to 21% effectively raised WACC across the board — the tax shield shrank.

WACC vs. Return on Invested Capital (ROIC)

The most important question is not "is my WACC good?" but rather "does my return exceed my WACC?" This comparison — WACC vs. Return on Invested Capital (ROIC) — is the ultimate test of value creation.

ROIC > WACC: The company is creating economic value — earning more on its capital than it costs to finance that capital. This is the hallmark of a great business. Companies like Apple, Microsoft, and Visa have historically generated ROIC well above their WACC, which is why they command premium valuations.
ROIC = WACC: The company is breaking even on a value basis. It is covering its cost of capital but not creating excess returns. Shareholders earn exactly what they require — no more, no less.
ROIC < WACC: The company is destroying economic value. Even if it is earning accounting profits, it is not generating enough return to satisfy its capital providers. This typically leads to declining valuations and pressure to restructure or sell assets.

How to Use WACC as a Hurdle Rate

In capital budgeting, WACC serves as the hurdle rate — the minimum acceptable return for any new investment, project, or acquisition. The logic is straightforward: if you invest capital at a return below WACC, you are effectively paying more for the capital than you are earning with it, which destroys value.

In practice, many companies add a buffer above WACC for their hurdle rate — often 2–5 percentage points — to account for estimation error, execution risk, and the opportunity cost of capital. A company with a WACC of 10% might require a 13–15% internal rate of return (IRR) before approving a new capital project.

Calculate and Interpret Your Own WACC

Use our free calculators to compute your WACC and get an instant plain-English interpretation alongside the industry benchmarks in this article:

📊 WACC Calculator → 🏢 Private Company WACC →