Do you calculate the cost of capital (WACC)?

We don't use the WACC because we believe that the theory behind it is quite flawed because of the difficulty / circularity involved in deriving the cost of equity capital.

Generally, this relies on CAPM. We discuss some of the issues with CAPM here - see the Montier quote about CAPM from here which is spot on, in particular.

We suspect with the WACC that it's a case of garbage in, garbage out unfortunately, which is why we suggest using general size-based discount factors in the DCFs.