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WACC component

CAPM Cost of Equity

CAPM is the standard build-up for the cost-of-equity input to WACC. Three inputs: risk-free rate, beta, equity risk premium. Each one has a single canonical source.

Direct answer
CAPM cost of equity equals the risk-free rate plus levered beta times the equity risk premium. For US analysis, source the risk-free rate from Federal Reserve H.15 (10-year Treasury), levered beta from Damodaran NYU Stern industry tables (relevered to the company's capital structure), and equity risk premium from Damodaran's monthly implied estimates.
Formula

CAPM cost of equity

CAPM cost of equity
rE = rf + betaL * (rM - rf)

Where rE is the cost of equity, rf is the risk-free rate (10-year Treasury for US analysis), betaL is the levered beta of the company (industry beta relevered to the company's capital structure), and (rM minus rf) is the equity risk premium.

Source: Damodaran, Investment Valuation 3rd ed., Chapter 7; Berk and DeMarzo, Corporate Finance 5th ed., Chapter 12Last verified June 2026.
Inputs and sources

One canonical source per input

Risk-free rate

US 10-year Treasury constant maturity yield, daily release from Federal Reserve H.15. Convention is to use the 10-year yield to match the long-horizon discounting in a DCF.

federalreserve.gov/releases/h15/
Beta

Industry unlevered beta from Damodaran NYU Stern (US Levered and Unlevered Betas by Industry), relevered to the company's target D/E using the Hamada equation.

pages.stern.nyu.edu/.../Betas.html
Equity risk premium

Damodaran's monthly implied ERP, posted to the Data Archives page. For a stable input, use the current monthly figure rounded to the nearest 25 basis points.

pages.stern.nyu.edu/.../dataarchived.html
Related

Where to go next

Last verified June 2026. Source: Damodaran NYU Stern datasets (January 2026 update); Federal Reserve H.15; Berk and DeMarzo, Corporate Finance 5th ed.