WACC Calculator (Weighted Average Cost of Capital)
Enter the value and cost of equity and debt and the tax rate.
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WACC Calculator (Weighted Average Cost of Capital) by TheCalcTools
How the WACC Calculator (Weighted Average Cost of Capital) works
WACC is the average return a company must earn for all its investors, weighted by how much of its capital comes from each. Interest is tax-deductible in most countries, so debt’s cost is taken after tax.
Use market values, not book values, and the CAPM for the cost of equity. WACC is the usual discount rate for a company’s free cash flows.
The formula
Worked example
Using the default values shown in the calculator:
| Market value of equity | $600 |
|---|---|
| Market value of debt | $400 |
| Cost of equity | 11 % |
| Cost of debt (pre-tax) | 6 % |
| Corporate tax rate | 25 % |
- 60% equity at 11% and 40% debt at 6% × (1 − 25%): WACC = 8.40%.
Result:
| WACC | 8.40% |
|---|---|
| Weight of equity | 60.0% |
| Weight of debt | 40.0% |
| After-tax cost of debt | 4.50% |
Frequently asked questions
Why does adding debt lower WACC at first?
Debt is cheaper than equity and its interest is tax-deductible. Too much debt raises both costs as risk rises.
Sources and further reading
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This calculator gives estimates for information only. Check important results independently before you rely on them. See our disclaimer.