WACC Calculator (Weighted Average Cost of Capital)

How to Use This WACC Calculator

• Market Value of Equity — the value of the company's equity.
• Market Value of Debt — total interest-bearing debt.
• Cost of Equity — the return equity investors require (often estimated via CAPM).
• Cost of Debt — the interest rate on the company's debt.
• Tax Rate — the corporate tax rate, since interest is tax-deductible.

What Is WACC?

WACC — weighted average cost of capital — is the blended rate a company pays to finance its operations using both equity and debt, weighted by how much of each it uses. It represents the minimum return a business must earn on its investments to satisfy all of its capital providers. If a project returns less than WACC, it destroys value; if it returns more, it creates value.

WACC is one of the most important numbers in corporate finance because it is the discount rate used in discounted cash flow (DCF) valuation. Equity is more expensive than debt (shareholders take more risk and demand higher returns), but debt has a hidden advantage: interest is tax-deductible, which lowers its effective cost. WACC blends these, accounting for the tax shield on debt, to give a single hurdle rate for investment decisions and valuations.

WACC Formula

Example Calculation

Equity $600,000, debt $400,000, cost of equity 12%, cost of debt 6%, tax 21%:

• Equity weight = 600 ÷ 1,000 = 60%; debt weight = 40%
• After-tax cost of debt = 6% × (1 − 0.21) = 4.74%
• WACC = (60% × 12%) + (40% × 4.74%) ≈ 9.1%

Common Mistakes to Avoid

• Forgetting the tax shield. Always use the after-tax cost of debt — interest is deductible.
• Using book values instead of market values. WACC should use market values of equity and debt where possible.
• Guessing the cost of equity. It should reflect real investor required return, often via CAPM, not a round number.
• Applying one WACC to every project. Riskier projects warrant a higher discount rate than the company average.

WACC for Startups & Founders

WACC shows up whenever you value a business, raise capital, or decide whether an investment clears the bar. For founders preparing a DCF, negotiating with investors, or making a major capital allocation decision, getting WACC right is essential — a discount rate that is off by a couple of points can swing a valuation dramatically.

Estimating cost of equity and building a defensible WACC is squarely in the wheelhouse of our financial modeling team. If you are working on a valuation, a raise, or a model that needs to hold up to investor scrutiny, a free call is a good first step.

Frequently Asked Questions

Related Free Tools