End Game

Variable
Number of firms
Beta
Cost of Equity

D/(D+E)

Cost of debt

After-tax Cost of Debt

Cost of Capital

Cost of Capital (local currency)

To estimate the hurdle rate (required return) on both equity and overall capital invested for firms.

Explanation
Number of firms in the indusry grouping.
Average regression beta across companies in the group.
Risk free Rate + Beta * Equity Risk Premium, in US $
Total Debt (including lease debt)/ (Total Debt (including lease debt)+
Market Cap), aggregated across all firms in group, with all numbers other
than market cap coming from most recent balance sheet; market cap is as
of last day of the most recent year.

Pre-tax cost of borrowing for sector, estimated based upon the standard
deviation of equity.
Pre-tax cost of borrowing (1- Marginal tax rate), in US $
Cost of Equity * (Equity/ (Debt + Equity)) + Cost of Debt (1- Marginal tax
rate) *(Debt/ (Debt + Equity)), with aggregated debt and market equity
values across all companies in the sector, using most recent balance sheet
for debt and most recent year-end for equity.

You can convert the $ cost of capital for a sector into any other currency,
if you can estimate an expected inflation rate for the local currency.
equity and overall capital invested for firms.

Why?
Law of large numbers?
Relative risk of sector
Required return on equity, given equity risk (beta).
Measure of debt used, as a proportion of overall funding (based upon market value)

This is an approximation, but the alternatives are not attractive. I could estimate the average cost of debt
across firms in the group, but many of them are unrated and there are outliers.
Interest saves you taxes, at the margin.
Required return on invested capital.

Required return on invested capital, converted into local currency.

Date updated: 5-Jan-22
Created by: Aswath Damodaran, adamodar@stern.nyu.edu
What is this data? Cost of equity and capital (updateable)
Home Page: http://www.damodaran.com
Data website: https://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html
Companies in each industry: https://www.stern.nyu.edu/~adamodar/pc/datasets/indname.xls
Variable definitions: https://www.stern.nyu.edu/~adamodar/New_Home_Page/datafile/varia
To update this spreadsheet, enter the following
Long Term Treasury bond rate =
Risk Premium to Use for Equity =
Global Default Spread to add to cost of debt =
Do you want to use the marginal tax rate for cost of debt?
If yes, enter the marginal tax rate to use

These costs of capital are in US$. To convert to a different currency, please enter
Expected inflation rate in local currency = 9.00%
Expected inflation rate in US $ = 1.00%

Industry Name Number of Firms Beta

Advertising 125 1.27
Aerospace/Defense 117 1.22
Air Transport 75 1.61
Apparel 934 0.91
Auto & Truck 80 1.40
Auto Parts 510 1.55
Bank (Money Center) 469 0.98
Banks (Regional) 100 0.82
Beverage (Alcoholic) 127 1.07
Beverage (Soft) 37 0.69
Broadcasting 62 1.12
Brokerage & Investment Banking 436 0.87
Building Materials 244 1.17
Business & Consumer Services 296 0.89
Cable TV 33 1.13
Chemical (Basic) 674 1.12
Chemical (Diversified) 37 1.42
Chemical (Specialty) 599 1.12
Coal & Related Energy 93 1.09
Computer Services 499 1.06
Computers/Peripherals 213 1.43
Construction Supplies 544 1.15
Diversified 211 1.03
Drugs (Biotechnology) 278 1.44
Drugs (Pharmaceutical) 680 1.06
Education 144 1.13
Electrical Equipment 658 1.01
Electronics (Consumer & Office) 85 1.32
Electronics (General) 937 1.35
Engineering/Construction 876 1.16
Entertainment 320 1.20
Environmental & Waste Services 168 0.91
Farming/Agriculture 282 0.99
Financial Svcs. (Non-bank & Insurance) 636 0.82
Food Processing 925 0.93
Food Wholesalers 89 0.80
Furn/Home Furnishings 250 1.16
Green & Renewable Energy 122 0.92
Healthcare Products 306 1.18
Healthcare Support Services 178 0.95
Heathcare Information and Technology 107 1.47
Homebuilding 40 1.89
Hospitals/Healthcare Facilities 131 0.88
Hotel/Gaming 418 1.04
Household Products 292 1.12
Information Services 93 1.40
Insurance (General) 141 0.69
Insurance (Life) 82 1.00
Insurance (Prop/Cas.) 149 0.90
Investments & Asset Management 445 0.79
Machinery 825 1.09
Metals & Mining 325 1.31
Office Equipment & Services 72 1.06
Oil/Gas (Integrated) 23 1.11
Oil/Gas (Production and Exploration) 114 1.87
Oil/Gas Distribution 105 1.21
Oilfield Svcs/Equip. 231 1.31
Packaging & Container 301 0.96
Paper/Forest Products 187 1.17
Power 372 0.88
Precious Metals 81 1.34
Publishing & Newspapers 176 0.81
R.E.I.T. 261 0.91
Real Estate (Development) 776 1.01
Real Estate (General/Diversified) 222 0.96
Real Estate (Operations & Services) 369 0.96
Recreation 137 1.02
Reinsurance 31 1.56
Restaurant/Dining 143 1.08
Retail (Automotive) 102 0.95
Retail (Building Supply) 36 1.34
Retail (Distributors) 630 0.78
Retail (General) 130 1.05
Retail (Grocery and Food) 73 0.75
Retail (Online) 96 1.74
Retail (Special Lines) 186 1.17
Rubber& Tires 73 1.27
Semiconductor 449 1.63
Semiconductor Equip 232 2.07
Shipbuilding & Marine 238 1.18
Shoe 60 1.11
Software (Entertainment) 58 1.44
Software (Internet) 40 1.13
Software (System & Application) 462 1.43
Steel 521 1.30
Telecom (Wireless) 61 1.03
Telecom. Equipment 290 1.22
Telecom. Services 140 0.91
Tobacco 29 0.80
Transportation 213 1.08
Transportation (Railroads) 16 0.97
Trucking 118 1.12
Utility (General) 12 0.79
Utility (Water) 72 0.72
Total Market 24435 1.11
Total Market (without financials) 21977 1.13
@stern.nyu.edu
ateable) Emerging Markets

damodar/New_Home_Page/data.html
damodar/pc/datasets/indname.xls
damodar/New_Home_Page/datafile/variable.htm

1.51% Standard Deviation

6.07%
1.23%
Yes
26.37%

Cost of Equity E/(D+E) Std Dev in Stock

9.19% 91.96% 37.70%
8.94% 88.11% 30.86%
11.28% 45.36% 27.25%
7.03% 82.82% 31.45%
10.03% 72.47% 27.15%
10.94% 84.26% 30.59%
7.46% 36.22% 20.12%
6.46% 19.23% 21.57%
7.99% 98.04% 27.53%
5.71% 95.45% 21.33%
8.30% 83.89% 31.56%
6.80% 36.41% 29.15%
8.61% 84.50% 29.87%
6.89% 88.80% 33.58%
8.39% 75.52% 29.66%
8.33% 80.28% 29.00%
10.10% 82.03% 27.73%
8.33% 88.38% 30.45%
8.11% 69.18% 33.72%
7.96% 93.66% 32.11%
10.17% 87.33% 31.88%
8.49% 72.50% 27.56%
7.74% 40.62% 23.87%
10.26% 96.81% 39.06%
7.94% 91.06% 29.93%
8.34% 73.68% 32.03%
7.63% 90.07% 30.26%
9.54% 65.39% 29.86%
9.70% 86.64% 29.55%
8.57% 44.85% 31.68%
8.76% 88.46% 35.36%
7.00% 64.34% 28.24%
7.53% 68.11% 28.77%
6.51% 42.63% 30.03%
7.15% 79.87% 27.39%
6.35% 61.21% 31.96%
8.57% 86.78% 28.06%
7.11% 66.39% 26.79%
8.67% 96.85% 35.95%
7.29% 75.00% 27.95%
10.45% 97.82% 36.01%
12.96% 66.15% 34.44%
6.87% 84.72% 25.64%
7.83% 59.12% 29.18%
8.31% 93.32% 29.08%
10.03% 91.79% 32.94%
5.69% 73.72% 21.84%
7.55% 55.50% 21.30%
6.97% 76.08% 25.62%
6.28% 37.56% 29.55%
8.15% 88.93% 28.94%
9.48% 76.98% 32.62%
7.97% 91.33% 33.14%
8.22% 84.42% 20.65%
12.87% 66.75% 38.38%
8.87% 55.10% 24.88%
9.45% 68.57% 31.91%
7.35% 84.57% 29.36%
8.59% 60.30% 30.13%
6.87% 51.06% 22.80%
9.63% 82.34% 36.84%
6.43% 89.91% 27.47%
7.01% 66.34% 16.96%
7.65% 32.03% 26.76%
7.35% 52.82% 24.72%
7.33% 64.09% 27.86%
7.69% 69.24% 29.27%
10.95% 71.94% 25.00%
8.04% 80.85% 29.13%
7.29% 67.61% 28.07%
9.64% 81.19% 28.87%
6.23% 49.02% 31.55%
7.88% 61.49% 24.46%
6.05% 69.40% 25.57%
12.09% 91.57% 40.61%
8.62% 77.74% 29.08%
9.23% 75.32% 26.09%
11.39% 93.99% 33.64%
14.07% 93.96% 33.55%
8.65% 70.66% 29.67%
8.23% 88.43% 30.27%
10.22% 92.39% 37.46%
8.36% 86.79% 32.13%
10.17% 95.75% 35.13%
9.42% 69.18% 31.19%
7.78% 70.44% 22.17%
8.91% 88.79% 30.69%
7.05% 75.02% 27.27%
6.38% 99.22% 24.98%
8.04% 65.63% 28.94%
7.39% 75.96% 21.25%
8.30% 61.07% 30.93%
6.28% 54.19% 18.41%
5.90% 53.07% 21.56%
8.22% 64.44% 29.55%
8.39% 75.01% 29.88%
 YouTube Video Guide

ing Markets

Cost of Debt Lookup Table (based on std dev in stock prices)

Standard Deviation Basis Spread
0 0.25 0.99%
0.25 0.4 1.65%
0.4 0.65 2.07%
0.65 0.75 3.16%
0.75 0.9 6.61%
0.9 1 8.34%
1 10 10.06%

Cost of Debt Tax Rate After-tax Cost of Debt D/(D+E) Cost of Capital
4.39% 12.15% 3.23% 8.04% 8.71%
4.39% 10.89% 3.23% 11.89% 8.26%
4.39% 5.49% 3.23% 54.64% 6.88%
4.39% 13.52% 3.23% 17.18% 6.38%
4.39% 11.42% 3.23% 27.53% 8.16%
4.39% 15.28% 3.23% 15.74% 9.73%
3.73% 20.88% 2.75% 63.78% 4.46%
3.73% 16.50% 2.75% 80.77% 3.46%
4.39% 18.56% 3.23% 1.96% 7.89%
3.73% 15.26% 2.75% 4.55% 5.57%
4.39% 12.84% 3.23% 16.11% 7.48%
4.39% 14.54% 3.23% 63.59% 4.53%
4.39% 14.38% 3.23% 15.50% 7.78%
4.39% 12.92% 3.23% 11.20% 6.48%
4.39% 11.92% 3.23% 24.48% 7.13%
4.39% 15.84% 3.23% 19.72% 7.32%
4.39% 18.93% 3.23% 17.97% 8.87%
4.39% 15.85% 3.23% 11.62% 7.74%
4.39% 14.73% 3.23% 30.82% 6.61%
4.39% 13.57% 3.23% 6.34% 7.66%
4.39% 12.71% 3.23% 12.67% 9.29%
4.39% 14.25% 3.23% 27.50% 7.04%
3.73% 14.56% 2.75% 59.38% 4.78%
4.39% 5.82% 3.23% 3.19% 10.04%
4.39% 14.59% 3.23% 8.94% 7.52%
4.39% 10.97% 3.23% 26.32% 7.00%
4.39% 13.02% 3.23% 9.93% 7.19%
4.39% 12.58% 3.23% 34.61% 7.36%
4.39% 12.34% 3.23% 13.36% 8.84%
4.39% 13.18% 3.23% 55.15% 5.63%
4.39% 8.67% 3.23% 11.54% 8.13%
4.39% 13.56% 3.23% 35.66% 5.66%
4.39% 13.30% 3.23% 31.89% 6.16%
4.39% 15.29% 3.23% 57.37% 4.63%
4.39% 15.02% 3.23% 20.13% 6.36%
4.39% 11.91% 3.23% 38.79% 5.14%
4.39% 15.23% 3.23% 13.22% 7.87%
4.39% 10.08% 3.23% 33.61% 5.81%
4.39% 10.31% 3.23% 3.15% 8.49%
4.39% 15.43% 3.23% 25.00% 6.28%
4.39% 9.55% 3.23% 2.18% 10.30%
4.39% 12.49% 3.23% 33.85% 9.67%
4.39% 16.82% 3.23% 15.28% 6.31%
4.39% 4.46% 3.23% 40.88% 5.95%
4.39% 13.34% 3.23% 6.68% 7.97%
4.39% 17.00% 3.23% 8.21% 9.47%
3.73% 13.05% 2.75% 26.28% 4.92%
3.73% 15.53% 2.75% 44.50% 5.41%
4.39% 15.69% 3.23% 23.92% 6.08%
4.39% 7.29% 3.23% 62.44% 4.38%
4.39% 13.83% 3.23% 11.07% 7.61%
4.39% 13.92% 3.23% 23.02% 8.04%
4.39% 10.01% 3.23% 8.67% 7.56%
3.73% 22.35% 2.75% 15.58% 7.37%
4.39% 13.70% 3.23% 33.25% 9.66%
3.73% 13.60% 2.75% 44.90% 6.12%
4.39% 13.11% 3.23% 31.43% 7.50%
4.39% 16.09% 3.23% 15.43% 6.72%
4.39% 12.93% 3.23% 39.70% 6.46%
3.73% 16.45% 2.75% 48.94% 4.85%
4.39% 11.84% 3.23% 17.66% 8.50%
4.39% 10.75% 3.23% 10.09% 6.11%
3.73% 4.52% 2.75% 33.66% 5.58%
4.39% 17.87% 3.23% 67.97% 4.65%
3.73% 10.94% 2.75% 47.18% 5.18%
4.39% 14.42% 3.23% 35.91% 5.86%
4.39% 11.79% 3.23% 30.76% 6.32%
3.73% 8.71% 2.75% 28.06% 8.65%
4.39% 8.08% 3.23% 19.15% 7.12%
4.39% 17.05% 3.23% 32.39% 5.97%
4.39% 15.88% 3.23% 18.81% 8.43%
4.39% 13.59% 3.23% 50.98% 4.70%
3.73% 17.77% 2.75% 38.51% 5.90%
4.39% 16.61% 3.23% 30.60% 5.19%
4.81% 10.18% 3.54% 8.43% 11.36%
4.39% 14.59% 3.23% 22.26% 7.42%
4.39% 15.01% 3.23% 24.68% 7.75%
4.39% 10.75% 3.23% 6.01% 10.90%
4.39% 12.62% 3.23% 6.04% 13.42%
4.39% 11.94% 3.23% 29.34% 7.06%
4.39% 13.91% 3.23% 11.57% 7.65%
4.39% 9.21% 3.23% 7.61% 9.69%
4.39% 13.23% 3.23% 13.21% 7.68%
4.39% 9.02% 3.23% 4.25% 9.87%
4.39% 16.09% 3.23% 30.82% 7.52%
3.73% 17.63% 2.75% 29.56% 6.29%
4.39% 9.08% 3.23% 11.21% 8.28%
4.39% 15.69% 3.23% 24.98% 6.10%
3.73% 20.60% 2.75% 0.78% 6.35%
4.39% 16.05% 3.23% 34.37% 6.39%
3.73% 24.55% 2.75% 24.04% 6.28%
4.39% 12.64% 3.23% 38.93% 6.32%
3.73% 24.29% 2.75% 45.81% 4.66%
3.73% 16.37% 2.75% 46.93% 4.42%
4.39% 13.47% 3.23% 35.56% 6.45%
4.39% 13.33% 3.23% 24.99% 7.10%
Cost of Capital
(Local
Currency)
17.32%
16.83%
15.35%
14.80%
16.72%
18.42%
12.73%
11.66%
16.44%
13.94%
16.00%
12.81%
16.32%
14.91%
15.62%
15.82%
17.49%
16.27%
15.05%
16.18%
17.95%
15.52%
13.08%
18.75%
16.03%
15.47%
15.68%
15.86%
17.46%
13.99%
16.69%
14.03%
14.57%
12.92%
14.78%
13.47%
16.41%
14.19%
17.09%
14.69%
19.03%
18.35%
14.73%
14.34%
16.52%
18.14%
13.23%
13.76%
14.48%
12.64%
16.13%
16.60%
16.08%
15.87%
18.35%
14.52%
16.01%
15.17%
14.90%
13.16%
17.09%
14.51%
13.94%
12.94%
13.51%
14.24%
14.74%
17.26%
15.60%
14.37%
17.02%
12.99%
14.29%
13.52%
20.19%
15.93%
16.28%
19.69%
22.40%
15.54%
16.18%
18.38%
16.21%
18.58%
16.03%
14.71%
16.85%
14.50%
14.77%
14.82%
14.70%
14.75%
12.95%
12.69%
14.88%
15.58%