WACC Calculator
Weighted Average Cost of Capital: the blended rate a company pays to finance its assets.
Inputs
How it works
WACC = (E/V)·Re + (D/V)·Rd·(1 − Tc), where V = E + D. Debt gets the tax shield.
Frequently asked questions
Why is debt cheaper than equity in WACC?
Interest is tax-deductible, so effective cost is Rd × (1 − Tc). Equity holders demand higher returns because they're paid last and bear more risk.
How do I find cost of equity?
Most commonly CAPM: Re = Rf + β × (Market return − Rf). Alternatively, a dividend-discount model.
Should I use book or market values?
Market values — WACC reflects what today's investors demand, not historical accounting balances.
What is WACC used for?
It's the discount rate for DCF valuation of a company's free cash flows, and the hurdle rate for corporate investment decisions.
Why does more debt lower WACC?
Up to a point — cheap after-tax debt reduces the blended rate. Too much debt raises bankruptcy risk and both Re and Rd rise.