WACC Calculator
Calculate weighted average cost of capital using equity, debt, financing costs and tax rate.
How to Use the WACC Calculator
Enter the market value of equity and debt, cost of equity, pre-tax cost of debt and applicable corporate tax rate. The calculator weights equity and after-tax debt costs by their share of total financing.
Practical Example
If a company is financed 70% by equity costing 10% and 30% by debt costing 5% before tax with a 25% tax rate, WACC is about 8.13%.
Factors That Affect the Result
Capital structure, interest rates, beta, market risk premium, credit spreads, tax rates and changing market values can all affect WACC.
Frequently Asked Questions
What does WACC represent?
It estimates the blended required return demanded by a company’s debt and equity providers.
Why is debt cost adjusted for tax?
Interest expense can be tax-deductible in many situations, reducing the effective after-tax cost of debt.
Can WACC be used as a discount rate?
Often yes for cash flows with risk similar to the company’s overall operating risk, but project-specific risk may require adjustment.
What WACC Represents
Weighted average cost of capital combines the required returns of debt and equity according to their capital weights, with an adjustment for the tax effect of interest where appropriate. Results are highly sensitive to assumptions such as beta, market risk premium, borrowing cost and target capital structure.