WACC — Cost of Capital

WACC is the discount rate every DCF model needs. Sharpnel computes it from inputs you already see in other panels — market cap from Fundamentals, debt-to-equity from Fundamentals, beta from Fundamentals, the 10-year Treasury yield from the Yield Curve panel — applies the standard CAPM cost-of-equity formula and the standard after-tax cost-of-debt adjustment, and shows you each input alongside the computed result.

The differentiator over a legacy terminal's bare WACC display is the sensitivity strip at the bottom: ±0.2 beta and ±50bp Rf perturbations with the resulting WACC delta. That lets you see at a glance whether your discount rate is fragile (small input changes move WACC by 100+ bp) or robust (changes barely budge the result), which is the input quality check every quant should run before committing to a DCF valuation.

• Palette: add wacc or add costofcapital.
• Symbol+function: NVDA WACC, AAPL WACC.

WACC = (E/V) × Rₑ + (D/V) × R_d × (1 − T_c)

• E — market value of equity (= market cap)
• D — market value of debt (book debt as proxy)
• V = E + D
• Rₑ — cost of equity, computed via CAPM: Rₑ = Rf + β × ERP
• R_d — cost of debt, proxied as Rf + 200bp (investment-grade spread)
• T_c — corporate tax rate, fixed at 21% (US statutory federal rate)

Three constants are baked in. Each one has a defensible default but the numbers aren't universal:

• Equity risk premium = 5.50% — the Damodaran 2024 implied ERP for US equities. Different texts use 5.0%, 6.0%, or implied-from-options figures. Your DCF's sensitivity to this number is real; the panel uses 5.50% so you can adjust mentally if you prefer a different figure.
• Credit spread = 200bp — investment-grade approximation. For BB / B-rated borrowers the spread is meaningfully wider; for AAA borrowers tighter. Use BetaCalculator + the Credit Spreads panel to estimate the firm- specific spread when precision matters.
• Tax rate = 21% — US statutory federal corporate rate. Effective tax rates are usually lower (often 15-20%) due to deductions; that would lower the after-tax cost of debt and lower WACC. The panel uses statutory because it's the conservative anchor.

The methodology footer documents these assumptions explicitly so the reader knows what knobs they'd tune in their own model.

WACC is classified into four regimes by the panel header:

• LOW DISCOUNT (< 7%) — large stable equity with low beta and modest debt. DCF terminal-value calculations are sensitive to small WACC moves here; double-check the inputs.
• MODERATE (7-10%) — typical mid-to-large cap. Most DCF models land in this band. Your work is checking the sensitivity strip more than the point estimate.
• ELEVATED (10-13%) — growth tech, leveraged consumer, or cyclically-stressed names. Discount rate compresses long-dated cash flows; your valuation is most sensitive to the terminal-value assumption.
• HIGH DISCOUNT (> 13%) — early-stage, distressed, or extremely high-beta. WACC may not be the right framework here; consider a venture-style cash-flow-multiple approach instead.

• DES — the security description one-pager that orients you on a name before WACC.
• FA — source of market cap, debt-to-equity, beta inputs.
• BETA — regression-derived beta with confidence intervals (more honest than book beta for high-volatility names).
• Yield Curve — source of the Rf input. When the curve is inverted, the 10Y Rf reads short-term-stressed; your WACC is artificially low until the inversion resolves.