Work out the WACC
The WACC from the risk-free rate, the market premium and a beta relevered from peers, with each step written out.
Free*
*Free up to 1,000,000 reads a month for the whole account, then $0.50 per 10,000 reads.
An example
What discount rate should we use for Kuechentechnik Nord if it is financed 40% with debt at 5.2%? Use Rational, Middleby and Welbilt as peers.
Your agent callsvaluation_waccFree*
The example business is Hansen & Voss, a restaurant-equipment wholesaler in Hamburg with 60 staff. The reply is the one the tool really gives.
{
"risk_free_rate": 0.0339,
"equity_risk_premium": 0.055,
"tax_rate": 0.3,
"pre_tax_cost_of_debt": 0.052,
"target_debt_to_equity": 0.4,
"peers": [
{
"name": "Rational AG",
"levered_beta": 0.92,
"debt": 12,
"equity": 7200,
"tax_rate": 0.28
},
{
"name": "Middleby",
"levered_beta": 1.21,
"debt": 2400,
"equity": 7600,
"tax_rate": 0.24
},
{
"name": "Welbilt",
"levered_beta": 1.35,
"debt": 1500,
"equity": 3100,
"tax_rate": 0.24
}
]
}Use it when
Before a DCF, to set the discount rate.
What it does
The cost of capital: CAPM cost of equity from the risk-free rate, the equity risk premium and a beta (given levered, given unlevered, or from peers, each unlevered at its own debt to equity and the median or mean relevered at the target's), plus any premiums; the cost of debt after tax; and the WACC at the target capital structure. Hamada (with the tax shield) or Harris-Pringle. Each step is written out. valuation_rates gives today's risk-free rates.
What comes back
beta (peers with their unlevered_beta, statistic, unlevered_beta, levered_beta, relevering, target_debt_to_equity), cost_of_equity, cost_of_debt_after_tax, weights (equity, debt), premiums, wacc and steps, each calculation in words. Every reply also carries cost_usd and balance_usd.
Inputs
| Name | Type | What it is |
|---|---|---|
risk_free_rateRequired | number | The risk-free rate. A decimal: 0.09 is 9%. -0.05 to 0.3. |
equity_risk_premiumRequired | number | The market risk premium. A decimal: 0.09 is 9%. 0 to 0.3. |
tax_rateRequired | number | The target's tax rate. A decimal: 0.09 is 9%. 0 to 0.9. |
pre_tax_cost_of_debtRequired | number | What the target pays on debt, before tax. A decimal: 0.09 is 9%. 0 to 1. |
target_debt_to_equity | number | Debt / equity at the target capital structure. Or give target_debt_weight. 0 to 20. |
target_debt_weight | number | Debt / (debt + equity). A decimal: 0.09 is 9%. 0 to 0.95. |
levered_beta | number | Use this beta as it is. -5 to 10. |
unlevered_beta | number | Relevered at the target capital structure. -5 to 10. |
peers | array of objects | 1 to 50 items. |
peers[].nameRequired | string | 1 to 200 characters. |
peers[].levered_betaRequired | number | -5 to 10. |
peers[].debtRequired | number | At least 0. |
peers[].equityRequired | number | Market value of equity. |
peers[].tax_rate | number | The peer's own; the target's when left out. A decimal: 0.09 is 9%. 0 to 0.9. |
peer_statistic | string | One of: median,mean. Default: median. |
relevering | string | One of: hamada,harris_pringle. Default: hamada. |
debt_beta | number | -1 to 3. Default: 0. |
size_premium | number | Added to the cost of equity. A decimal: 0.09 is 9%. -0.2 to 0.5. |
country_risk_premium | number | Added to the cost of equity. A decimal: 0.09 is 9%. -0.2 to 0.5. |
other_premium | number | Any other premium added to the cost of equity. A decimal: 0.09 is 9%. -0.2 to 0.5. |
The call
Over MCP, call valuation_wacc on https://api.conecto.chat/mcp/valuation. Over REST:
curl -X POST https://api.conecto.chat/v1/tools/valuation_wacc \
-H "Authorization: Bearer $CONECTO_KEY" \
-H "Content-Type: application/json" \
-d '{"risk_free_rate":0.0339,"equity_risk_premium":0.055,"tax_rate":0.3,"pre_tax_cost_of_debt":0.052,"target_debt_to_equity":0.4,"peers":[{"name":"Rational AG","levered_beta":0.92,"debt":12,"equity":7200,"tax_rate":0.28},{"name":"Middleby","levered_beta":1.21,"debt":2400,"equity":7600,"tax_rate":0.24},{"name":"Welbilt","levered_beta":1.35,"debt":1500,"equity":3100,"tax_rate":0.24}]}'When it refuses
A refused call costs nothing and says what to do next.
| Code | When | What to do |
|---|---|---|
invalid_input400 | Not exactly one beta (levered, unlevered or peers), not exactly one capital structure, or a peer with no equity. | Give one beta source and one of target_debt_to_equity or target_debt_weight. |
More Valuation tools
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