β CAPM-Powered Tool

WACC Calculator with Beta

Enter your Beta and the CAPM formula automatically calculates your Cost of Equity in real time. Then compute full Weighted Average Cost of Capital with a complete formula breakdown.

WACC Calculator with Beta (CAPM)

Live Cost of Equity Preview
⚡ CAPM Live Preview
Ke = Rf + β × (Rm − Rf)  =  4.50% + 1.00 × 5.50% = 10.00%
Cost of Equity (Ke)
10.00%

Step 1 — CAPM Inputs (to calculate Cost of Equity)

💡 Typical range: 0.3 – 2.5. Market = 1.0
%
%
💡 S&P 500 historical avg ≈ 10%
%

Step 2 — Capital Structure Inputs

$
%
$
%
💡 US Federal rate = 21% (pre-filled)

📊 Your Results

Weighted Average Cost of Capital
—
WACC
Your result will appear here.
Beta (β)
—
Cost of Equity (CAPM)
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Equity Weight
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Debt Weight
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Equity Contribution
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Debt Contribution (after-tax)
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📖 Reference Guide

How to Interpret Your WACC Result

WACC benchmarks vary by industry and market conditions. Use this guide to understand what your number means.

Below 8%

Very Low — Excellent

Typical of large-cap, investment-grade companies. Utilities, large consumer staples. Cheap financing means more projects create value.

8% – 12%

Moderate — Healthy

Most S&P 500 companies. Normal for established businesses with solid credit and moderate Beta. A strong operational foundation.

12% – 18%

High — Elevated Risk

Growth companies, higher Beta stocks, or firms with significant leverage. Common in technology and energy sectors.

Above 18%

Very High — Startup/Distressed

Startups, pre-revenue companies, or heavily distressed businesses. Only exceptional returns justify investment at this hurdle rate.

FAQ

Frequently Asked Questions

Everything you need to know about using Beta in WACC calculations.

What is Beta and why does it matter for WACC?+
Beta (β) measures a stock's systematic risk — how much it moves relative to the broad market. A Beta of 1.0 means the stock moves in line with the market. A Beta of 1.5 means a 10% market move is expected to produce a 15% move in the stock. In WACC calculations, Beta directly determines the Cost of Equity via CAPM: higher Beta → higher required return → higher WACC. Two companies with identical capital structures but different Betas will have materially different WACCs and implied valuations.
Where do I find the Beta for a stock?+
You can find Beta from: Yahoo Finance (5-year monthly Beta shown on any stock's Summary page), Bloomberg Terminal (2-year weekly raw and adjusted), Damodaran's website (nyu.edu/~adamodar — industry-level unlevered Betas updated annually), or by calculating it yourself via regression of monthly returns against a market index over 3–5 years. For private companies, use the median unlevered Beta from comparable public companies, then re-lever using your target's capital structure.
What is the difference between levered and unlevered Beta?+
Levered Beta (βL) — also called equity Beta — reflects both business and financial risk. This is what you observe for a publicly traded stock and what you should enter in this calculator. Unlevered Beta (βU) — also called asset Beta — strips out the effect of debt and reflects only underlying business risk. The Hamada Equation links the two: βL = βU × [1 + (1 − T) × D/E]. When comparing companies with different capital structures, analysts often unlever peers' Betas, take the median, then re-lever for the target company's D/E ratio.
What risk-free rate should I use?+
For US-dollar denominated WACC, use the 10-year US Treasury yield. As of 2024–2025, this is approximately 4.2–4.7%. For a long-term DCF, many practitioners use a normalized rate (e.g. 4.0–4.5%) rather than the spot rate to reduce short-term interest rate noise. For non-US companies, use the sovereign bond yield of the relevant country and add a country risk premium to the equity risk premium.
What equity risk premium (ERP) should I use?+
The equity risk premium is the difference between expected market return (Rm) and the risk-free rate (Rf). Professor Aswath Damodaran (NYU) publishes monthly implied ERP estimates — the US implied ERP was approximately 4.5–5.5% in 2024. Our calculator defaults to Rm = 10% and Rf = 4.5%, implying an ERP of 5.5%, which is consistent with Damodaran's long-run estimates. You can adjust Rm and Rf to reflect your own ERP assumption.
How does a higher Beta affect my WACC?+
Each 0.5 increase in Beta raises Cost of Equity by approximately 0.5 × ERP. With an ERP of 5.5%, increasing Beta from 1.0 to 1.5 adds 275 basis points to Ke (from 10.0% to 12.75%). For a company with 60% equity weighting, this translates to roughly 165 basis points increase in WACC — which can reduce a DCF enterprise value by 10–20%. This is why Beta estimation is one of the most impactful assumptions in any valuation model.
Should I use book or market values for the capital structure weights?+
Finance theory and CFA curriculum recommend using market values. Market capitalization reflects current investor expectations for equity, and market value of debt approximates what it would cost to retire today. Book values can be significantly distorted by accounting decisions, write-downs, and retained earnings. For debt, if you cannot find market value, treating it as a simple bond at current prevailing yields is a common approximation.
Can I use this calculator for private companies?+
Yes, with adjustments. For private companies: (1) obtain an industry unlevered Beta from Damodaran's database, then re-lever using your target D/E ratio; (2) add a size premium of 1–3% to Ke to reflect smaller company risk; (3) consider a company-specific risk premium for concentration risk or key-person dependency; (4) use target capital structure weights rather than current ones. See our Private Company WACC Calculator for full guidance.
What is a good WACC for a company with Beta of 1.2?+
With Beta = 1.2, Rf = 4.5%, and Rm = 10%, CAPM gives Ke = 4.5% + 1.2 × 5.5% = 11.1%. If this company has 60% equity and 40% debt at 6% pre-tax cost with 21% tax, WACC = 11.1% × 0.60 + 6% × (1−0.21) × 0.40 = 6.66% + 1.90% = ≈8.56%. This is a healthy WACC consistent with a moderate-risk company — typical of large-cap industrials or diversified financials.
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What is WACC with Beta?

The standard WACC formula requires a Cost of Equity (Ke) as an input. The most rigorous and widely-used method for estimating Ke is the Capital Asset Pricing Model (CAPM), which derives the cost of equity from three inputs: the risk-free rate, the expected market return, and Beta — a measure of the stock's systematic risk relative to the market.

This calculator chains CAPM and WACC together so you can go directly from Beta to a final WACC without having to manually calculate Cost of Equity in a separate step. As you type Beta, the CAPM preview at the top of the calculator updates in real time.

The Two-Step Formula

The calculation works in two sequential steps:

// Step 1: Use CAPM to derive Cost of Equity
Ke = Rf + β × (Rm − Rf)

// Step 2: Plug Ke into the standard WACC formula
WACC = Ke × [E/(E+D)] + Kd × (1−Tc) × [D/(E+D)]

The key insight is that Beta drives the equity risk premium in CAPM. A higher Beta means equity investors demand a greater return for bearing the company's systematic risk, which directly raises Ke and therefore WACC.

Why Beta Is Central to Valuation

In a DCF model, WACC is the discount rate applied to all future free cash flows. A 1-percentage-point change in WACC can shift a company's implied enterprise value by 10–20%. Since Beta is the primary driver of Ke — typically the largest component of WACC — accurate Beta estimation is one of the highest-leverage assumptions in any valuation.

Analysts commonly benchmark Beta against sector averages (see the reference table in the sidebar), verify it against two or three data sources, and perform sensitivity analysis across a Beta range of ±0.25 to understand the impact on WACC and enterprise value.

WACC with Beta for US Companies (2024–2025)

Using current market inputs (Rf ≈ 4.5%, ERP ≈ 5.5%), here are representative WACC estimates by sector:

  • Utilities (β ≈ 0.45): Ke ≈ 7.0% → WACC ≈ 5.5–7.0%
  • Consumer Staples (β ≈ 0.65): Ke ≈ 8.1% → WACC ≈ 6.5–8.5%
  • Large-cap Technology (β ≈ 1.2): Ke ≈ 11.1% → WACC ≈ 8.5–11%
  • Growth Technology (β ≈ 1.6): Ke ≈ 13.3% → WACC ≈ 11–14%
  • Early-stage / Startups (β ≈ 2.0+): Ke ≈ 15.5%+ → WACC ≈ 15–25%+

Limitations of CAPM-Based Cost of Equity

While CAPM is the industry standard, it has known limitations. It assumes investors hold fully diversified portfolios and that Beta fully captures relevant risk. In practice, historical Beta may not predict future risk, especially for companies undergoing strategic changes. CAPM also ignores the Fama-French factors (size and value premiums) that empirically explain cross-sectional return differences.

Despite these limitations, CAPM remains dominant due to its simplicity, transparency, and wide acceptance among investment bankers, equity analysts, boards, and regulators — all of whom use it as a common language for cost of capital discussions.