Assembly itself is one line, WACC = (E/V)·Re + (D/V)·Rd·(1−t), and by now every symbol has a source and a date. What's left is knowing when the output is wrong. Calibrate against the population. Each January, Damodaran's data page publishes cost of capital by industry sector, with US, global, and emerging-market/India datasets. Recently the distributions have looked roughly like this (illustrative mid-2026 shape, so check against the live pages):
| Market (currency) | ~10th pctile | Median | ~90th pctile |
|---|---|---|---|
| US non-financials (USD) | ~6.5% | ~8.5% | ~11% |
| India non-financials (INR) | ~10% | ~11.5–12% | ~14% |
How do you use these ranges to catch errors?
Read the table as a net that catches errors, three rules deep:
- Absolute bounds. For an established non-financial firm, an input is broken if a US WACC comes out below ~6% (anything below Rf + 2 is suspect) or above ~13%, or an INR WACC below ~9% or above ~16%. In order, the usual suspects are double-counted country risk, a currency mismatch, a regression beta pasted raw, and book weights.
- The spread is narrow. Four-fifths of US firms fall inside ~6.5–11%. Companies differ from each other far more in cash flows (question 2's ROIC spread) than in WACC. If your thesis lives or dies on 40bp of discount rate, you don't have a thesis. You have a rounding error wearing a suit. That's the reason the terminal-value work forces ±1-point WACC sensitivity on every DCF.
- Cross-market gaps are mostly inflation plus country risk. Judgment has little to do with them. India's median is ~3–3.5 points above the US median. About 2 points of that is expected-inflation differential, and ≈1–1.5 is λ-weighted country risk. An 11.5% INR WACC and an 8.5% USD WACC can describe equally risky businesses.
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Do banks get a WACC, and can WACC change over time?
Two structural notes before the builds. First, financials get no WACC. For banks and insurers, debt (deposits, float) is raw material, and it isn't financing. Their operating and financing cash flows can't be separated. You value the equity directly, at the cost of equity. You'll get the excess-return machinery for that in the special-situations capstone. Second, WACC can vary over time. A firm de-levering from D/V 40% to 10% over your forecast deserves a year-by-year WACC path, re-levering beta as it goes, and the LBO models in the second modeling module run on this. For stable structures, one rate is fine.