WACC Calculator (Weighted Average Cost of Capital)
Blend a company's cost of equity and after-tax cost of debt into a single weighted average cost of capital, from the market values and rates you supply.
- WACC
- 7.58%
- Equity weight (E/V)
- 60%
- Debt weight (D/V)
- 40%
- After-tax cost of debt
- 3.95%
How it works
WACC blends what a company pays each of its two kinds of capital providers — equity holders and lenders — into one rate, weighted by each side's share of total financing: WACC = (E/V)·Re + (D/V)·Rd·(1 − Tc), where V = E + D is total capital. Debt's cost is counted after tax because interest payments are typically tax-deductible, so a company's real cost of debt is its stated rate reduced by its marginal tax rate; equity has no equivalent deduction, so its cost enters at face value.
Every figure here — the market values of equity and debt, the cost of equity, the pre-tax cost of debt, and the tax rate — is a number you supply directly, never estimated or looked up. A real WACC analysis often estimates cost of equity itself (commonly via CAPM, which needs a risk-free rate and market beta) rather than taking it as a given, but that estimate depends on live market data this calculator doesn't fetch — treat this as the final blending step once you already have your own rate assumptions.
FAQ
Should I use book value or market value for equity and debt?
Market value is the standard choice for WACC, since it reflects what investors would actually have to pay today to acquire that claim on the company — book value (accounting carrying value) can differ substantially, especially for equity. For debt, book value is sometimes used as a practical stand-in when market value isn't readily available, since debt tends to trade closer to its face value than equity does.
Why does a higher tax rate lower WACC?
Because interest on debt is tax-deductible, a higher tax rate shrinks the after-tax cost of debt, Rd·(1 − Tc) — the company effectively gets a bigger subsidy on every dollar of interest it pays. That's the entire reason the formula uses after-tax cost of debt rather than the stated rate directly: taxes make debt financing cheaper on a net basis than its quoted rate alone suggests.
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