Build a defensible discount rate the way the desk does it: CAPM cost of equity, after-tax cost of debt, and market-value weights into a single WACC — plus a Hamada unlever / relever on beta and a capital-structure sensitivity grid that shows how WACC moves as you lever the business up. Drop the result straight into the DCF or LBO modeler. Pure client-side math.
Unlevered ("asset") beta strips out the current capital structure; relever it to a target debt mix to get the equity beta that capital structure implies.
Cost of equity (CAPM) = rf + βL × ERP + size premium + specific/country premium. The size and specific premiums are additive build-up adjustments common in private-company and small-cap valuation.
After-tax cost of debt = pre-tax Kd × (1 − tax rate) — interest is tax-deductible, so the effective cost to the firm is lower.
Weights are on a market-value basis: wE = E / (E + D), wD = D / (E + D).
WACC = wE × Ke + wD × Kd(after-tax). (Preferred stock, if any, is a third weighted term — omitted here; fold it into equity or debt as appropriate.)
Hamada unlever / relever — the equity beta embeds financial leverage. Unlevered (asset) beta: βu = βL / (1 + (1 − tax) × D/E). Relever to a target structure: βL' = βu × (1 + (1 − tax) × D/E_target). The sensitivity grid relevers βu to each column's target debt-to-capital before computing Ke and WACC, so it answers "what's my WACC if I run the business at 30% debt?" — not just a naïve beta bump.
What's intentionally omitted — preferred equity, a separate cost of debt per tranche, country-specific tax shields, mid-year convention, and a target vs current structure distinction beyond the grid. Confirm beta source (raw vs adjusted, comparable vs regression) and ERP convention against your firm's house assumptions.
Educational financial-modeling tool — not investment advice. WACC is only as good as its beta and ERP inputs, which are estimates with wide confidence intervals. Confirm against your firm's house assumptions before any valuation rides on it. All math runs in your browser; no inputs are sent to a server.