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Terminal Value CalculatorDCF / Gordon Growth / Exit Multiple
Assumption / WACC

WACC is the most-powerful lever in your DCF

Terminal value sits at the longest discount horizon in the model, which is exactly where WACC has the most leverage. A 100 basis point change in WACC moves TV more than the same change in g over the realistic parameter range.

Direct answer
WACC is the weighted average cost of capital across debt and equity, used as the discount rate for free cash flow to the firm. For terminal value purposes, two things matter most: the cost-of-equity (CAPM) build-up that drives the equity weight, and the long-run capital structure assumption that drives the weighting. For a US public-company benchmark, Damodaran publishes industry-level WACCs annually in January.
WACC formula
WACC = (E / (D + E)) * Re + (D / (D + E)) * Rd * (1 - t)
E = market value of equity; D = market value of debt; Re = cost of equity; Rd = pre-tax cost of debt; t = marginal tax rate
CAPM cost of equity
Re = Rf + beta * ERP
Rf = risk-free rate (10y Treasury per Fed H.15); beta = levered industry beta (Damodaran Jan 2026); ERP = equity risk premium (Damodaran implied ERP, January 2026 monthly update)
Source: Damodaran, Investment Valuation, 3rd ed., Chs. 7-8; Damodaran Jan 2026 dataset (WACC, betas, ERP)Last verified June 2026.
Sensitivity

WACC moves terminal value more than g

Illustrative table for terminal-year FCF of $100M, perpetuity g of 2.5%. Values are TV in millions. Read vertically: a 100bp change in WACC at the 8 to 9 percent band changes TV by roughly 25 percent.

WACCTV ($M)vs 9% WACC
6.0%$2,929+85%
7.0%$2,278+44%
8.0%$1,864+18%
9.0%$1,577Base
10.0%$1,367-13%
11.0%$1,206-24%
12.0%$1,079-32%

For comparison, the analogous g-sensitivity table on the Gordon Growth page shows TV moving 15 to 25 percent for a 100bp change in g at the 2 to 4 percent band. WACC has the bigger lever.

Damodaran benchmarks

Industry WACC reference

The Damodaran NYU Stern dataset publishes US industry-level WACCs each January. Pull the latest figure for the target industry directly from the source URL below.

Cost of Capital by Industry (US)

Median and average WACC across ~90 US industry groupings. Published in January each year. Includes cost-of-equity build-up, cost-of-debt, capital-structure weights, and effective tax rate by industry.

Damodaran WACC by industry →
Implied Equity Risk Premium (US)

Monthly implied ERP estimates back-solved from S&P 500 pricing and consensus payout expectations. Use the most recent monthly figure (or smoothed trailing average) for the CAPM ERP input.

Damodaran ERP archive →
Source: Aswath Damodaran, NYU Stern, January 2026 annual update for WACC and Beta tables; monthly update for ERPLast verified June 2026.

Test WACC sensitivity live

The calculator sweeps WACC from 5 to 15 percent and shows terminal value plus the discount-back-to-today figure update in real time.

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