WACC Calculator — Weighted Average Cost of Capital
WACC is the blended rate a firm must earn on its assets to satisfy all investors. Enter the market values and required returns for equity and debt plus the tax rate to get the WACC and its component contributions.
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Weighted average cost of capital — the blended required return on the firm
7.58%
WACCEquity
60%
Debt
40%
- 1
Total firm value (V)
600,000 + 400,000 = 1,000,000 - 2
Equity weight (E/V)
600,000 ÷ 1,000,000 = 0.6 - 3
After-tax cost of debt
5% × (1 − 21 ÷ 100) = 3.95%Interest is tax-deductible, so the effective cost is lower than the stated rate. - 4
WACC
0.6 × 10% + 0.4 × 3.95% = 7.58%
How does this calculator work?
WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc). It blends the cost of equity and after-tax cost of debt, weighted by their shares in the total firm value. It is used as the discount rate in DCF analysis and represents the minimum return the firm must earn to satisfy all capital providers.
Formula
How this is calculated
A company funds its operations with a mix of equity (shareholders) and debt (bondholders/loans). Each source of capital carries a cost: equity holders expect a return Re (estimated via CAPM or the dividend-discount model) and debt holders charge an interest rate Rd. Because interest expense is tax-deductible, the effective cost of debt is Rd × (1 − Tc) where Tc is the corporate tax rate — this "tax shield" makes debt cheaper than its face rate.
WACC weights each cost by the proportion that source represents in the firm's total capital: WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc) where V = E + D. The result is the minimum return the firm must earn on its existing assets to create value for its investors, and it is widely used as the discount rate in discounted cash-flow (DCF) valuations.
Important caveats: WACC assumes the capital structure stays constant over the projection horizon; it is a nominal, after-tax rate; and it should use market values, not book values, of equity and debt where possible. The cost of equity in particular is uncertain and sensitive to the beta and market-risk-premium assumptions — small changes to Re can shift WACC meaningfully.
Frequently asked questions
Interest payments are tax-deductible in most jurisdictions, so a company paying 5% interest with a 25% tax rate only bears a net cost of 3.75% = 5% × (1 − 0.25). This "interest tax shield" is one of the key reasons debt is typically cheaper than equity and why firms use leverage.
WACC varies widely by industry and risk profile. For large stable companies in developed markets it is commonly 6–10%; for smaller or riskier businesses it may be 12–20% or higher. Regulated utilities can be as low as 4–6%. The cost of equity and the capital structure are the biggest drivers.
Finance theory prescribes market values, because WACC represents the opportunity cost at current prices. In practice, market value of equity is easy to observe (share price × shares outstanding), but market value of debt is often approximated by book value for investment-grade companies where the two are close.
TG we-Calculate Editorial Team. (2026). WACC Calculator — Weighted Average Cost of Capital [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/cost-of-capital-calculator
TG we-Calculate Editorial Team. "WACC Calculator — Weighted Average Cost of Capital." TG we-Calculate. 2026. https://we-calculate.com/calculator/cost-of-capital-calculator.
TG we-Calculate Editorial Team, "WACC Calculator — Weighted Average Cost of Capital," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/cost-of-capital-calculator
@misc{wecalculate_cost_of_capital_calculator, title = {WACC Calculator — Weighted Average Cost of Capital}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/cost-of-capital-calculator}}, year = {2026}, note = {TG we-Calculate} }
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