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Enter equity, debt, beta and borrowing cost to get cost of equity and WACC.
34.94% applies to old-regime companies with turnover above ₹400 crore and income above ₹10 crore. Confirm rates on incometaxindia.gov.in.
The short version
Quick answer: WACC (weighted average cost of capital) is the yearly return a company must earn to pay both its shareholders and its lenders. Example: ₹750 crore of equity and ₹250 crore of debt. With a beta of 1.0, a 9% borrowing cost and 25.17% tax, WACC is about 12.34% (illustrative).
Guide
How a company's cost of money is built
A company uses two kinds of money. Shareholders put in equity and expect a return for their risk. Lenders give loans and charge interest. WACC blends the two costs, weighted by today's market values.
Think of a family that buys a ₹1 crore flat with ₹75 lakh of savings and a ₹25 lakh loan. If the savings could earn 14% elsewhere and the loan costs 9%, the flat must earn about 12.75% a year (0.75 × 14% + 0.25 × 9%), before tax (illustrative).
E is equity, D is debt and V = E + D, all at market value. Ke is the cost of equity, Kd the pre-tax cost of debt and t the tax rate. WACC is the discount rate in a DCF (discounted cash flow) valuation.
Most analysts use CAPM (the Capital Asset Pricing Model): Ke = risk-free rate + beta × equity risk premium. With the defaults and a beta of 1.0, that is 7.29% + 1.0 × 6.92% = 14.21% (illustrative).
The risk-free rate is what a loan to the Government of India earns. The equity risk premium (ERP) is the extra return investors want for owning shares. Beta scales it for one company's risk.
| Input | Default | Source and date |
|---|---|---|
| Risk-free rate (≈10-year G-Sec) | 7.2898% | RBI: yield on the 6.94% GS 2036 bond, as on 8 Oct 2026 |
| Equity risk premium, India | 6.92% | Damodaran (NYU Stern), country risk file, July 2026 update |
| India default spread (optional) | 1.75% | Same Damodaran file |
| Beta | Yours | The company's own beta (1.0 moves with the market) |
| Tax rate | 25.17% / 34.94% | Concessional / old regime, large company |
In short: two dated market numbers drive the cost of equity, so refresh them on the day you value.
Start with the ≈10-year G-Sec (Government of India bond) yield, because it matches rupee cash flows. Professor Aswath Damodaran says this yield still holds some default risk, as India is rated below AAA. He subtracts India's default spread (1.75%, July 2026).
His 6.92% ERP already includes India's country risk, so pairing it with the full G-Sec yield counts some risk twice. The full yield gives a more cautious, higher WACC. That is the calculator's default.
| Approach (example above) | Risk-free | Ke | WACC |
|---|---|---|---|
| G-Sec yield as it is | 7.29% | 14.21% | 12.34% |
| Damodaran: G-Sec minus default spread | 5.54% | 12.46% | 11.03% |
In short: the method moves this WACC by about 1.3 percentage points, so say which one you used.
Beta measures how much a stock moves with the market. A beta of 1.2 means it tends to move about 1.2% when the market moves 1%. Stock-data websites show it. To estimate it yourself:
=SLOPE(stock returns, index returns).Raw betas are noisy. For an unlisted company, use the average beta of listed peers. Damodaran publishes industry betas.
Interest is tax-deductible, so WACC uses the after-tax cost of debt: Kd × (1 − tax rate). Use the rate the company pays. The concessional regime is 25.17% (22% + 10% surcharge + 4% cess). Under the old regime, turnover above ₹400 crore and income above ₹10 crore means 34.94% (30% + 12% surcharge + 4% cess).
Example: 9% × (1 − 0.2517) = 6.73%. On a ₹100 crore loan, ₹9 crore of interest costs about ₹6.73 crore after tax (illustrative).
A WACC normally lands between the after-tax cost of debt and the cost of equity, closer to whichever has the bigger weight. Then check four things: market values, not book values; one currency throughout; today's borrowing rate, not an old loan's; and dated market inputs. Your result's sensitivity grid shows how far WACC moves when beta or the ERP shifts.
It applies CAPM for the cost of equity, then the WACC formula above, with the dated defaults. The sensitivity grid shows WACC at other betas and premiums.
FAQs
There is no single good number. WACC depends on the company's risk, its debt and its tax rate. With the October 2026 defaults, a company with a beta of 1.0 and no debt has a WACC equal to its cost of equity, about 14.21%. Riskier, more volatile businesses have higher WACCs; steady businesses with cheap debt have lower ones.
Use market values. Shareholders and lenders expect returns on what their stake is worth today, not on old accounting figures. For equity, use market capitalisation: share price times the number of shares. For debt, book value is a common stand-in when the company's bonds do not trade.
In his July 2026 country risk update, Professor Aswath Damodaran of NYU Stern puts India's total equity risk premium at 6.92%. That is a mature-market premium plus an extra premium for investing in India. He updates the file regularly, so check his data page for the latest.
Only in an unusual case. WACC is a weighted average, so it normally lands between the after-tax cost of debt and the cost of equity. It drops below the after-tax cost of debt only if equity looks cheaper than debt, which usually means an input is wrong; the calculator flags that. WACC can still be below the pre-tax borrowing rate, because interest saves tax.
Yes. After you see your result, you can download a free Excel model. Every output is a live formula, with WACC, DCF, sensitivity and notes tabs, so you can see how each figure is built.
Illustrative only. This WACC Calculator is a learning tool. It is not investment advice or a recommendation to buy or sell any security. Market inputs are dated and change often; see Official sources above.
