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WACC Calculator

Calculate weighted average cost of capital from equity/debt mix, costs, and tax rate.

Results

Equity weight
60.00%
Debt weight
40.00%
After-tax cost of debt
3.75%
WACC
7.50%

How to use this calculator

  1. Enter equity value and its required return (cost of equity).
  2. Enter debt value, cost of debt, and tax rate.
  3. Review equity/debt weights, after-tax cost of debt, and WACC.

Inputs explained

Equity value
Market value of equity or total capital funded by shareholders.
Cost of equity (%)
Required return on equity (from CAPM or comparable estimates).
Debt value
Market value of interest-bearing debt.
Cost of debt (%)
Effective interest rate on debt (pre-tax).
Tax rate (%)
Marginal corporate tax rate; creates the debt tax shield.

How it works

Weights = equity ÷ (equity + debt) and debt ÷ (equity + debt).

After-tax cost of debt = cost of debt × (1 − tax rate). WACC = equity weight × cost of equity + debt weight × after-tax cost of debt.

Formula

Total capital = Equity + Debt
Equity weight = Equity ÷ Total
Debt weight = Debt ÷ Total
After-tax cost of debt = Cost of debt × (1 − Tax rate)
WACC = (Equity weight × Cost of equity) + (Debt weight × After-tax cost of debt)

When to use it

  • Evaluating hurdle rates for projects or M&A models.
  • Testing how leverage changes blended capital costs.
  • Comparing scenarios with different tax rates or financing mixes.

Tips & cautions

  • Use market values for equity and debt when possible; book values can skew weights.
  • Cost of equity often comes from CAPM; cost of debt should reflect current borrowing costs, not historic coupons.
  • If debt is minimal, WACC approaches cost of equity; if heavily levered, after-tax cost of debt weighs more.
  • Single-period view; ignores changing capital structure over time.
  • Assumes a flat tax rate and stable costs of debt/equity.
  • Does not model project-specific risk adjustments or country risk premiums.

Worked examples

$600k equity @10%, $400k debt @5%, 25% tax

  • Equity weight = 60%, Debt weight = 40%
  • After-tax cost of debt = 3.75%
  • WACC = (0.6 × 10%) + (0.4 × 3.75%) = 7.5%

$1.2M equity @11%, $800k debt @6%, 21% tax

  • Equity weight = 60%, Debt weight = 40%
  • After-tax cost of debt = 4.74%
  • WACC ≈ (0.6 × 11%) + (0.4 × 4.74%) ≈ 8.7%

Deep dive

This WACC calculator blends equity and debt costs using capital weights and the debt tax shield to give a clean hurdle rate.

Enter equity/debt values, costs, and tax rate to see WACC, plus the underlying weights and after-tax cost of debt.

FAQs

Should I use market or book values?
Use market values for a truer economic weight. Book values can misstate leverage if prices moved.
Where do I get cost of equity?
Often from CAPM (risk-free + beta × market premium) or target-return benchmarks for your sector.
Why after-tax cost of debt?
Interest is often tax-deductible, so the effective cost of debt is reduced by the tax rate.
Can WACC change over time?
Yes—capital structure, rates, and tax laws shift. Recalculate for major financing changes or new market conditions.
Is WACC the project hurdle rate?
It’s a starting point for average-risk projects. Adjust up for riskier projects or down for safer, shorter-duration projects.

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For corporate finance estimates only. Validate assumptions and market values with your finance team before using as a hurdle rate.