WACC (weighted average cost of capital)
Weighted average cost of capital: the minimum return the business must generate to satisfy both shareholders and creditors. It's the discount rate used to bring future cash flows to present value (DCF, EPV).
WACC = Equity weight × Cost of equity + Debt weight × After-tax cost of debt
A company is funded with shareholders' money and with debt, and neither is free. The WACC weights the cost of each by its share of the capital structure: the cost of equity comes from the CAPM (risk-free rate + beta × risk premium), and the cost of debt from the interest it pays, with the advantage that interest is tax-deductible.
It has two uses, best not conflated. As a discount rate, it's what turns future flows into today's value: raising it a point can cut a valuation by 15-20%. As a hurdle, it's the minimum the business has to earn: if ROIC sits below the WACC persistently, the company destroys value however fast it grows.
It isn't an observable figure, it's an estimate, and beta — its noisiest ingredient — changes with the period and the index used to compute it. In the valuation tab you can see each component separately and override whichever one you don't buy.
Where to see it on ValuatePad
Year by year, for every company, in the tab EPV & WACC valuation.