Weighted Average Cost of Capital (WACC) Calculator

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Weighted Average Cost of Capital (WACC) Calculator

WACC represents the average rate of return a company is expected to pay to all its capital providers, weighted by the proportion of debt and equity in its capital structure. More info →

Input

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How This Calculator Works

WACC is the blended cost of all the money a company uses, from shareholders (equity) and lenders (debt). Each cost is weighted by its share of total capital. Interest is tax-deductible, so the cost of debt is reduced by the tax rate first.

The Formula

WACC = (E ÷ V) × Ke + (D ÷ V) × Kd × (1 − Tax)

E = equity value · D = debt value · V = E + D · Ke = cost of equity · Kd = pre-tax cost of debt

What Each Input Does

Value of Equity / Value of Debt: How much of the company is funded by shareholders and by lenders. Together they make total capital.
Cost of Equity (%): The return shareholders expect. You can estimate it with the Cost of Equity calculator.
Pre-Tax Cost of Debt (%): The interest rate the company pays on its borrowing.
Tax Rate (%): The company's tax rate, used to work out the after-tax cost of debt.

Step by Step

Total capital is equity plus debt.
The equity weight and debt weight are each divided by total capital.
The after-tax cost of debt is the pre-tax cost × (1 − tax rate).
Each cost is multiplied by its weight and the two are added. The result is shown to 2 decimals.

Reading the Result

WACC – the minimum return a project must earn to satisfy both lenders and shareholders. It is often used as the discount rate in NPV.

Quick Example

Equity 600,000, debt 400,000, cost of equity 12%, pre-tax cost of debt 8%, tax rate 25%. Weights are 60% and 40%, and the after-tax cost of debt is 8% × 0.75 = 6%. WACC = 60% × 12% + 40% × 6% = 9.60%.