WACC Calculator
Blend your cost of equity and after-tax cost of debt into one required return for the whole business.
WACC Calculator
Your own assumption. Enter 0 if interest is not tax-deductible.
WACC
—
Cost of Equity
—
After-Tax Cost of Debt
—
Equity Weight (E ÷ V)
—
Debt Weight (D ÷ V)
—
Pre-Tax Cost of Debt
—
WACC Reduction from Tax Shield
—
Capital structure weights
Contribution to WACC
Assumptions & method
- Formula: WACC = (E ÷ V) × Ke + (D ÷ V) × Kd × (1 − T), where V = E + D.
- E and D are market values you enter, not accounting book values. Weights are therefore based on the current capital structure, not a target one.
- CAPM: Ke = risk-free rate + β × equity risk premium. Alternatively you can enter the cost of equity directly.
- Tax treatment: the tax rate T is a single rate you choose and is applied only to debt interest. Set it to 0% if interest gives no tax benefit.
- Preferred stock, leases treated as debt and other capital sources are not modelled separately; add them to debt or equity at market value if you want them included.
- All rates are annual and treated as constant. Beta, premium and cost of debt are estimates and can vary widely by source.
Results are estimates based on the figures you enter. They are not guarantees and not financial advice.
What is WACC?
WACC is the average rate a business must earn on its assets to satisfy everyone who funds it. Equity holders expect a higher return than lenders because they carry more risk, but interest is often tax-deductible, which lowers the effective cost of debt. Weighting each source by its share of total capital gives one blended rate. It is commonly used as the discount rate in a DCF valuation and as a hurdle rate for projects with similar risk to the business as a whole. Because beta, the risk premium and the cost of debt are estimates, treat the result as a range rather than a single exact figure.