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WACC Calculator

Weighted Average Cost of Capital: the blended rate a company pays to finance its assets.

Instant results Private — runs in your browser Updated January 1970

Inputs

Market value of equity (E)in millions

Market value of debt (D)in millions

Cost of equity (Re)from CAPM: Rf + β(Rm − Rf)

Cost of debt (Rd)yield on company's bonds

Corporate tax rate (Tc)

WACC

$7.50

Weights: 60.0% equity · 40.0% debt

After-tax cost of debt

3.75%

Weighted equity cost

6.00%

Weighted debt cost

1.50%

Total firm value (V)

$1,000.00M

WACC = (E/V)·Re + (D/V)·Rd·(1 − Tc), where V = E + D. Debt gets the tax shield.

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.

Results are estimates for educational purposes only and are not financial advice. Verify with a qualified professional before making decisions.

Last updated January 1970