WACC Calculator (Weighted Average Cost of Capital)

Blend the cost of equity and the after-tax cost of debt into one discount rate. Enter the market value of equity and debt, cost of equity, pre-tax cost of debt, and tax rate to get your WACC and capital weights.

Quick Facts

Formula
WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc)
E and D are the market values of equity and debt; V = E + D is total capital.
Tax shield
Cost of debt is applied after tax
Interest expense is tax-deductible, so Rd is multiplied by (1 − Tc); the cost of equity is not tax-adjusted.

Your Results

Calculated
WACC
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Weighted average cost of capital
Equity weight (E/V)
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Share of capital from equity
Debt weight (D/V)
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Share of capital from debt
After-tax cost of debt
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Rd × (1 − tax rate)

Ready

Enter equity value, debt value, cost of equity, cost of debt, and tax rate, then press Calculate.

How the WACC Calculator works

Weighted Average Cost of Capital (WACC) is the blended rate a company is expected to pay, on average, to finance its assets across all sources of capital — equity and debt. It is one of the most widely used discount rates in corporate finance: analysts use it to bring future cash flows back to present value in a DCF model, and to set the minimum return a project must clear to be worth pursuing.

The formula

WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc)

Here E is the market value of equity, D is the market value of debt, and V = E + D is total capital. Re is the cost of equity — the return shareholders require. Rd is the pre-tax cost of debt — roughly the interest rate the company pays on its borrowings. Tc is the corporate tax rate, applied to the cost of debt because interest payments are tax-deductible while dividends and the cost of equity are not.

Worked example

Take a company with $6,000,000 of equity and $4,000,000 of debt (V = $10,000,000), a 10% cost of equity, a 6% pre-tax cost of debt, and a 21% tax rate. Equity funds 60% of capital and debt funds 40%. The after-tax cost of debt is 6% × (1 − 0.21) = 4.74%. WACC = (0.60 × 10%) + (0.40 × 4.74%) = 6.00% + 1.90% ≈ 7.90%. That 7.90% is the blended rate the company would use as a discount rate or hurdle rate for new projects.

What moves WACC most

  • Capital structure (E/V and D/V): since debt is usually cheaper than equity once the tax shield is applied, shifting the mix toward more debt tends to lower WACC — up to the point where added financial risk starts pushing both Re and Rd higher.
  • Cost of equity: equity is compensated for more risk than debt, so it is almost always the larger of the two rates. A higher required return from shareholders raises WACC directly, weighted by equity's share of capital.
  • Tax rate: a higher corporate tax rate makes the debt tax shield more valuable, lowering the after-tax cost of debt and, with it, WACC — all else equal.

Limits of this calculator

This tool computes the standard textbook WACC from the inputs you provide; it does not estimate the cost of equity for you (for example via the Capital Asset Pricing Model), does not adjust for preferred stock or other financing layers, and does not account for how market values shift as capital structure changes. Market value of debt is often approximated with book value in practice, which is a common simplification rather than an exact market price. Treat the result as a modeling input, not investment advice.

Frequently Asked Questions

How is WACC calculated?
WACC blends the cost of each source of financing, weighted by its share of total capital: WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc). E and D are the market values of equity and debt, V = E + D is total capital, Re is the cost of equity, Rd is the pre-tax cost of debt, and Tc is the corporate tax rate.
Why is the cost of debt multiplied by (1 − tax rate)?
Interest paid on debt is typically tax-deductible, which lowers its effective cost to the company. Multiplying the pre-tax cost of debt by (1 − Tc) converts it to an after-tax figure so it is comparable to the cost of equity, which receives no such deduction.
Should I use market value or book value for equity and debt?
The formula calls for market values. Market value of equity is usually share price times shares outstanding; market value of debt is harder to observe, so many analysts use the book value of interest-bearing debt from the balance sheet as a reasonable proxy when market prices are not available.
What is WACC used for?
WACC is most often used as the discount rate in a discounted cash flow (DCF) valuation and as the minimum required return, or hurdle rate, for evaluating whether a new project or investment is expected to create value. A project expected to return less than WACC is expected to destroy value; one expected to return more is expected to create it.

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