WACC Calculator
Find the weighted average cost of capital.
Results update as you type.
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How it works
The weighted average cost of capital, or WACC, is the blended rate of return a company must earn on its investments to satisfy both its shareholders and its lenders. This WACC calculator combines the cost of equity and the after-tax cost of debt, each weighted by its share of the firm's total financing. Equity typically costs more than debt because shareholders bear more risk and demand a higher return, while debt is cheaper still after tax because interest payments are deductible, reducing their effective cost. The result is the minimum return a project must clear to add value, which makes WACC the natural discount rate for net present value analysis and a key input in company valuation. A lower WACC means capital is cheaper and more projects become worthwhile, while a higher WACC raises the bar. Analysts, corporate finance teams, and valuation professionals estimate WACC constantly, though the inputs, especially the cost of equity, require judgement. Enter the market values of equity and debt, their respective costs, and the corporate tax rate, and the calculator returns the weighted average cost of capital as a percentage.
WACC = (E/V)·Re + (D/V)·Rd·(1 − tax)
The weighted average cost of capital blends the cost of equity and the cost of debt in proportion to how much of each finances the firm. Equity's cost is weighted by its share of total capital, and debt's cost is weighted by its share and multiplied by one minus the tax rate, because interest is tax-deductible and so effectively cheaper. Adding the two weighted pieces gives the single rate the company must earn to satisfy all its investors.
Source:Corporate finance (cost of capital)
We review all our tools from time to time to ensure accuracy.
Worked example
How to use this calculator
- 1
Enter your values
Enter equity value, debt value, cost of equity, cost of debt and tax rate.
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Weighted average cost of capital updates instantly as you type — no button to press.
Frequently asked questions
What is WACC?
WACC, the weighted average cost of capital, is the average rate a company pays to finance its assets, blending the cost of equity and the after-tax cost of debt in proportion to how much of each it uses. It represents the minimum return the firm must earn on new investments to keep all its capital providers satisfied, and it serves as the standard discount rate in valuation.
Why is debt multiplied by (1 − tax)?
Interest paid on debt is tax-deductible, so borrowing shields some income from tax and reduces the company's effective cost of that debt. Multiplying the cost of debt by one minus the tax rate captures this tax shield. If the cost of debt is five percent and the tax rate thirty percent, the after-tax cost is only three and a half percent, making debt cheaper than its headline rate.
How is WACC used in valuation?
WACC is the discount rate applied to a company's future free cash flows in a discounted cash flow valuation. Because it reflects the blended required return of all investors, discounting at WACC converts projected cash flows into their present value to the firm as a whole. A small change in WACC can move a valuation substantially, so estimating it carefully is important.
What weights should I use, book or market?
Use market values of equity and debt rather than accounting book values, because market values reflect what investors actually require today. Market capitalisation gives the equity weight, and the market value of outstanding debt gives the debt weight. Book values can be outdated and understate equity, distorting the weights and therefore the resulting cost of capital.
Does a lower WACC always mean a better company?
Not necessarily. A low WACC lowers the hurdle for investment and can raise valuation, but it often reflects heavy use of cheap debt, which increases financial risk. Loading up on debt reduces WACC only up to a point; beyond it, the rising risk of default pushes both the cost of debt and the cost of equity higher. There is a balance to strike.