The weighted average cost of capital that appears on every company page of the Baratelli WACC Reference is calculated the same way, from the same inputs, updated on the same quarterly cadence. This is the methodology page — the practitioner walkthrough of exactly what goes in and how each input is sourced. It is the reference for the calculation and the reference for the assumptions.
The weighted average cost of capital blends the after-tax cost of debt with the cost of equity, weighted by the market value of each source of capital.
Every company page in the reference computes this same equation with company-specific inputs. The market inputs (risk-free rate and equity risk premium) are shared across all companies at the snapshot date so that comparability across pages is preserved.
The risk-free rate is the 10-year US Treasury yield on the snapshot date. The 10-year is chosen over the 30-year because most practitioner DCF models use a 10-year discounting horizon, and matching the rate maturity to the projection horizon is the standard convention. Using the 30-year Treasury would introduce an interest rate mismatch that would bias WACC upward.
The equity risk premium is the incremental return investors require for holding equity over the risk-free rate. The reference uses Aswath Damodaran's implied equity risk premium series (NYU Stern), which is calculated monthly by solving for the discount rate that equates the current S&P 500 price to a present value of forecast dividends and buybacks.
The implied ERP is preferred over the historical realized ERP for two reasons. First, the implied ERP reflects current-market pricing rather than long-run averages that may not represent the going-forward opportunity set. Second, the historical realized ERP is materially higher in the US than in most global markets, which biases US-issuer valuations if applied uncritically.
Beta measures a stock's covariance with the overall market. The reference uses a five-year weekly regression of stock returns against the S&P 500 total return, with Blume adjustment (one-third weight toward 1.0). The five-year window is long enough to capture through-cycle behavior for most industries; the weekly frequency is common practice and reduces noise from daily microstructure effects.
The Blume adjustment reflects the empirical tendency of betas to mean-revert toward 1.0 over time. It moves calculated beta one-third of the distance to 1.0. For a raw regression beta of 1.30, the adjusted beta is 1.30 − (1.30 − 1.00) × 0.33 = 1.20.
Practitioner note: a five-year beta is sometimes the wrong window. For a company that has fundamentally repositioned (a spin-off, a major acquisition, a business-model shift), the five-year regression may not represent the current risk profile. In those cases, consider running a three-year regression or using the beta of comparable pure-play peers.
The pre-tax cost of debt is the current market yield on the issuer's outstanding senior unsecured debt. For an investment-grade issuer this is well approximated by adding the credit spread implied by the issuer's rating to the Treasury yield at a matched maturity.
The reference uses each issuer's actual bond curve where publicly traded senior debt exists, or a comparable-rating index yield where the issuer's specific bonds do not have sufficient liquidity for a reliable current yield. For high-yield issuers, the current yield to worst on the most recent benchmark issue is used.
The after-tax cost of debt is the pre-tax cost of debt multiplied by (1 − marginal tax rate). This reflects the tax deductibility of interest expense in the US tax code.
The marginal tax rate is the rate that applies to the next dollar of taxable income — not the effective rate on prior years' earnings. In the US, the federal corporate statutory rate is 21%. State and local taxes typically add 3–6 percentage points depending on the state mix of the issuer's operations.
For companies with material foreign operations, the marginal tax rate may differ from a US-only rate. Practitioner judgment is required: some analysts use the disclosed effective tax rate from the most recent 10-K, others use a blended jurisdictional rate weighted by pre-tax income mix. The reference uses a company-specific rate that reflects the most recent effective tax rate adjusted for known jurisdictional structures.
The capital structure weights use market values, not book values. The market value of equity is the current share price multiplied by shares outstanding, adjusted for any dual-class or convertible securities. The market value of debt is the sum of on-balance-sheet interest-bearing debt at market values (or amortized cost as a book-value proxy where market values are not observable).
Operating leases capitalized under ASC 842 are not included in debt for WACC purposes in this reference. The rationale is that ASC 842 leases represent operating obligations bundled with the operating cost of capital, not incremental financing. Practitioners may reasonably disagree, and the underlying workbook allows the reader to reclassify.
The cost of equity is calculated via the Capital Asset Pricing Model:
CAPM is not the only cost-of-equity model. The Fama-French three-factor and five-factor models, the arbitrage pricing theory framework, and the build-up model all have practitioner uses. The reference uses CAPM because it is the most widely comparable across companies and the most defensible for cross-issuer benchmarking, which is the purpose of a reference of this kind.
Every company page carries a snapshot date at the top. The snapshot date is the date on which the market inputs (risk-free rate, equity risk premium) and the company-specific inputs (beta, cost of debt, tax rate, capital structure) were locked. WACC is a moving number; readers should not treat a stale snapshot as current.
The reference is refreshed quarterly. The next refresh is scheduled for 2026-09-30. Readers who need real-time WACC estimates for their own workflow are directed to the companion Excel workbook, which exposes all formulas so the reader can drop in their own current inputs.
This is a research and educational reference. It is not investment advice. The Baratelli Institute is a publisher under the Lowe v. SEC publisher exception, not a registered investment advisor. Readers should not rely on WACC estimates published here for buy or sell decisions.
All inputs are sourced to public documents: SEC filings, US Treasury data, Damodaran's published research, and rating agency reports. Where practitioner judgment is required, the reference discloses the assumption and cites the alternative. The goal is transparency, not authority.
The full company index: The WACC Reference — S&P 500 cost of capital by company.
The applied product: The Baratelli CFO & Controller's Guide walks capital structure, cost of debt, and cost of equity within a full controllership framework. WACC is one chapter of that guide; this reference is the applied companion for public issuers.
The Foundations layer: The Corporate Finance Reference (Foundations Series) covers TVM, capital budgeting, CAPM, and WACC at the vocabulary level for readers building up to the applied work here.