WACC Calculator

Quick Answer

Last updated: 10 November 2026 ·How we calculate this: the WACC formula with an after-tax cost of debt

How This WACC Calculator Works

Enter the value of the company’s equity and debt (and preferred stock if it has any), the cost of each, and the tax rate. The calculator finds each source’s share of total capital, cuts the cost of debt for the tax saving on interest, and adds the weighted costs to give WACC. If you do not know the cost of equity, choose CAPM and enter the risk-free rate, beta and expected market return.

How to Use the WACC Calculator

1. Enter the market value of equity and debt, and preferred stock if any.
2. Enter the cost of equity, or choose CAPM and enter the risk-free rate, beta and market return.
3. Enter the pre-tax cost of debt and preferred stock.
4. Enter the corporate tax rate.
5. Press Calculate to see WACC, the weights and each part.

WACC Formulas

• Total capital: V = E + D + P
• WACC: (E ÷ V) × re + (D ÷ V) × rd × (1 − T) + (P ÷ V) × rp
• CAPM cost of equity: re = rf + β × (rm − rf)
• After-tax cost of debt: rd × (1 − T)

Here re, rd and rp are the costs of equity, debt and preferred stock, T is the tax rate, rf is the risk-free rate, β is beta and rm is the expected market return.

Key Terms

• WACC: weighted average cost of capital, the blended cost of a firm’s equity, debt and preferred stock.
• Cost of equity: the return shareholders expect for owning the stock.
• Cost of debt: the interest rate the company pays to borrow, before tax.
• Beta: how much a stock moves compared with the market.
• Capital structure: the mix of debt, preferred stock and equity a firm uses.

Worked Example

A company has $800 million of equity and $200 million of debt. Its beta is 1.2, the risk-free rate is 4.5%, the market is expected to return 10%, debt costs 7% and the tax rate is 25%.

• Cost of equity (CAPM) = 4.5% + 1.2 × (10% − 4.5%) = 11.10%
• Weights: equity 80%, debt 20%
• After-tax cost of debt = 7% × (1 − 0.25) = 5.25%
• WACC = 0.8 × 11.10% + 0.2 × 5.25% = 9.93%

Real-Life Examples

• Simple firm: 60% equity at 10% and 40% debt at 6% with a 21% tax rate gives a WACC of 7.90%.
• CAPM: beta 1.2, risk-free 4.5% and market 10% give a 11.1% cost of equity and a WACC of 9.93% with 20% debt.
• With preferred stock: $500 equity at 12%, $300 debt at 5% and $200 preferred at 8% give 8.79%.
• Hurdle rate: a project returning 9% beats a 7.90% WACC, so it adds value.

WACC vs Cost of Equity

• Cost of equity: the return shareholders expect. Use it to value the equity alone.
• WACC: the blended cost of all capital. Use it to value the whole firm or a typical project.
• Debt-free firm: WACC equals the cost of equity.

WACC by Debt Weight

Assumes the costs stay the same; in practice more debt raises both.

Why WACC Is an Estimate

Each input is a judgement. Beta changes with the data source and time period, the market risk premium used by financial managers often ranges from about 5% to 8%, and the cost of debt should reflect what the company would pay to borrow today, not the coupon on old bonds. Many analysts use net debt (debt minus cash) for the weights when a firm holds a lot of cash. Try a few sets of inputs to see how sensitive the result is.

How Companies Use WACC

Finance teams use WACC as the discount rate when valuing a business with discounted cash flows, and as the hurdle rate for new investments: a project that earns more than WACC adds value, and one that earns less destroys it. Investors use it to judge whether a company’s returns on capital beat its cost of capital. Because debt is cheaper after tax, adding some debt can lower WACC, but too much debt raises the risk and the cost of both debt and equity.

Common Mistakes to Avoid

• Forgetting the tax shield. Multiply the cost of debt by (1 − tax rate).
• Using book values. Market values give a better picture of the weights.
• Using an old coupon rate. The cost of debt is today’s borrowing rate.
• Mixing units. Enter all values in the same unit, such as millions.
• Treating WACC as exact. Small input changes can move it a lot.

Frequently Asked Questions

References & Sources