Look up Microsoft's WACC and you get a different answer depending on where you look. In September 2026, 3 public sites put it at 8.2%, 9.86% and 18.28%. The Finapolis Analyzer used 10.12%, and Damodaran's January 2026 data put Microsoft's industry at 9.34%.
That gap is not a rounding issue. In the Analyzer's Microsoft model, each extra point of WACC took 4.6% to 4.9% of the share price off the result. Pick the 18.28% instead of the 8.2% and you are running a different valuation. The good news: the formula is the same everywhere. The differences come from 3 inputs, and you can check each one.
Key takeaways
- The equity risk premium causes most of the disagreement between sites. Beta comes second. The risk-free rate matters least.
- Every input has a date. A premium only makes sense next to the risk-free rate it was measured against.
- Industry averages give you a range to test a company's WACC against: 6.96% for the whole US market in January 2026.
5 answers for 1 company
| Source | WACC | Risk-free | Beta | ERP |
|---|---|---|---|---|
| ValueInvesting.io | 8.2% | 3.9% to 4.4% | 0.57 to 0.96 | 4.6% to 5.6% |
| Damodaran, software group | 9.34% | 3.95% | 1.28 | 4.46% |
| Macroaxis | 9.86% | n/a | n/a | n/a |
| Finapolis Analyzer | 10.12% | 4.83% | 1.08 | 5.00% |
| Stock Analysis on Net | 18.28% | 5.20% | 1.10 | 12.25% |
Read across the rows and the pattern is clear.
- The equity risk premium does most of the damage. Stock Analysis on Net uses 12.25%, more than double everyone else's 4.46% to 5.6%. That one choice explains its 18.28%.
- Beta is next. ValueInvesting.io uses 0.57 to 0.96; the others use 1.08 to 1.28. A lower beta means a lower WACC.
- The risk-free rate barely moves the answer. The rates only run from 3.9% to 5.20%.
The WACC formula
WACC is the average return a company's lenders and shareholders expect, weighted by how much of the company each one funds. A DCF model uses it to turn future cash flows into today's value.
Weighted average cost of capital
WACC = E/(D+E) · Re + D/(D+E) · Rd · (1 − t)
= (98.49% × 10.22%) + (1.51% × 4.75% × (1 − 17.47%))
Microsoft WACC10.12%E is the market value of the shares and D is the debt. R_e is the cost of equity, R_d the cost of debt and t the tax rate. Debt gets the (1 − t) discount because interest is tax-deductible.
Microsoft is almost all equity: debt is just 1.51% of its capital. So its WACC lands only 0.10 points below its 10.22% cost of equity. For most large companies, getting the cost of equity right is most of the job.
CAPM: where the cost of equity comes from
No filing tells you what shareholders expect to earn, so you estimate it. Every source in the table above that shows its method uses the capital asset pricing model (CAPM): cost of equity = risk-free rate + beta × equity risk premium. Here is what each input means, and where the choices hide.
Risk-free rate: pick a Treasury and date it
This is the return on a US government bond. The 10-year Treasury yielded 4.96% on 22 September 2026, and the 5-year 4.83% (FRED, the St. Louis Fed's data service). Damodaran starts from the 10-year, the Finapolis Analyzer uses the 5-year. On that day the two were only 0.13 points apart.
Equity risk premium: the extra return for owning stocks
This is how much more investors expect from stocks than from Treasuries, and it is where sources disagree most. Damodaran, an NYU Stern professor, backs it out of current market prices: at the start of 2026 he put it at 4.23%, measured over the 4.18% 10-year yield of that date. Kroll, another widely used source, sets 5.0% (reaffirmed 30 January 2026).
Beta: how much the stock swings with the market
A beta of 1.0 means the stock tends to move in step with the market; above 1 it swings more. It is measured from past returns, so the answer depends on which past you pick. Here is Microsoft against SPY, an S&P 500 fund, measured 3 common ways.
| Window | Returns | Raw beta | Blume-adjusted |
|---|---|---|---|
| 2 years, weekly | 104 | 1.12 | 1.08 |
| 5 years, monthly | 60 | 1.11 | 1.07 |
| 1 year, daily | 251 | 0.95 | 0.97 |
Even the day the week ends on matters. Measure the same 2 years of weekly returns Wednesday to Wednesday instead of Friday to Friday, and Microsoft's beta jumps from 1.12 to 1.33. One week does most of it: from 29 July to 5 August 2026, Microsoft rose 24.82% while SPY rose 5.53%.
A WACC is only as good as its 3 inputs: a dated risk-free rate, a premium that matches it, and a beta whose window you know.
How Finapolis builds the WACC for you
Doing all this by hand means a Treasury download, a beta regression, a balance sheet and a spreadsheet. The Finapolis Analyzer does it in one click and puts every input on screen. Here is Microsoft on 24 September 2026.
| Input | Where it comes from | Microsoft |
|---|---|---|
| Risk-free rate | 5-year US Treasury yield | 4.83% |
| Beta | Against SPY, about 2 years of weekly returns, Blume-adjusted | 1.08 |
| Equity risk premium | Kroll's recommended US premium, reaffirmed 30 January 2026 | 5.00% |
| Cost of equity | Risk-free rate + beta × premium | 10.22% |
| Weights | Market cap and total debt | 98.49% equity, 1.51% debt |
| Cost of debt | Default pre-tax rate, taxed at the company's rate | 4.75%, 17.47% tax |
| WACC | Weighted average of the two costs | 10.12% |
The dating problem from earlier is handled for you: the risk-free rate is the latest 5-year Treasury yield, not a number someone typed in months ago. Hover over any figure in the Capital structure & discount rate panel and a tooltip explains it.
Open a stock's Valuation tab in the Analyzer, click Run DCF Model and expand Capital structure & discount rate to see this table for any company. Disagree with an input? Change beta, cost of debt or tax rate under Model Inputs, then click Refresh DCF Model to see how the WACC and the valuation move.
WACC by industry in 2026
Once you have a number, check it against the company's industry. Damodaran publishes a free US dataset every January; the 2026 edition covers 5,994 companies.
| Industry | Cost of equity | WACC |
|---|---|---|
| Semiconductor | 10.72% | 10.55% |
| Software (System & Application) | 9.64% | 9.34% |
| Drugs (Pharmaceutical) | 8.33% | 7.85% |
| Machinery | 8.25% | 7.70% |
| Retail (General) | 7.54% | 7.27% |
| Beverage (Soft) | 6.81% | 6.33% |
| Food Processing | 6.66% | 5.79% |
| Telecom. Services | 6.75% | 5.39% |
| Utility (General) | 5.02% | 4.36% |
| Total Market | 8.02% | 6.96% |
Riskier, more cyclical businesses sit at the top, steady ones like utilities at the bottom. Treat a row as a range, not an answer: Microsoft's own beta, 0.95 to 1.12 depending on the window, is well below its software group's 1.28 average. And skip this approach for banks and insurers, whose borrowing is part of the business rather than financing.
A 5-step check for your own WACC
- Date every input, and keep the dates close together.
- Pair each equity risk premium with the risk-free rate it was measured against.
- Know how your beta was measured, and compare at least 2 windows.
- Weight equity at market value, then focus on the cost of equity.
- Compare the result with the industry table, and see how much the valuation moves when WACC changes by 1 point.
WACC is one of 3 inputs to a DCF; the other 2, the cash-flow forecast and the terminal value, are covered in how a DCF valuation is built.
Frequently asked questions
What is a typical WACC for a US company in 2026?
At the start of 2026, Damodaran's data put 80% of US companies between 5.26% and 9.88%, and the whole US market at 6.96% (7.72% without banks and other financial firms).
Should I use the 5-year or the 10-year Treasury?
Either can work. What matters is that your equity risk premium was measured against the same kind of rate. On 22 September 2026 the two differed by only 0.13 points.
