WACC is the average return a company must earn to satisfy all its investors. Projects earning more than WACC create value. Because debt interest is tax-deductible, the after-tax cost of debt is used.
How to use the WACC Calculator – Weighted Average Cost of Capital
- Cost of equity
- Equity (market value)
- Cost of debt (pre-tax)
- Debt
- Corporate tax rate
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the cost of equity, market value of equity, cost of debt, value of debt and the corporate tax rate.
Tips
- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.
Common mistakes to avoid
- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.
Inputs explained
| Field | What to enter |
|---|---|
| Cost of equity | In % |
| Equity (market value) | Amount in your currency |
| Cost of debt (pre-tax) | In % |
| Debt | Amount in your currency |
| Corporate tax rate | In % |
What each result means
- Weight of equity = [Equity (market value)]÷([Debt] + [Equity (market value)])×100
- Weight of debt = [Debt]÷([Debt] + [Equity (market value)])×100
- After-tax cost of debt = [Cost of debt (pre-tax)]×(1 – [Corporate tax rate]÷100)
- Weighted average cost of capital (WACC) = [Weight of equity]÷100×[Cost of equity] + [Weight of debt]÷100×[After-tax cost of debt]
Example values
How the main result changes when Cost of equity changes and everything else stays at the example values above:
| Cost of equity (%) | Weighted average cost of capital (WACC) (%) |
|---|---|
| 5 | 4.91 |
| 7.5 | 6.58 |
| 10 | 8.25 |
| 12.5 | 9.91 |
| 15 | 11.58 |
| 20 | 14.91 |
Formula
WACC = E ÷ (D + E) × cost of equity + D ÷ (D + E) × cost of debt × (1 − tax rate)Worked example
Inputs — Cost of equity: 10 %; Equity (market value): $600,000,000; Cost of debt (pre-tax): 6 %; Debt: $300,000,000; Corporate tax rate: 21 %.
Results — Weight of equity = 66.67 %; Weight of debt = 33.33 %; After-tax cost of debt = 4.74 %; Weighted average cost of capital (WACC) = 8.25 %.
Frequently asked questions
What is a good WACC?
Lower is better for the company; typical values are 6–12%.
Why is debt cheaper than equity?
Lenders take less risk, and interest is tax-deductible.
Should I use book or market values?
Market values are preferred.
What formula does the WACC Calculator – Weighted Average Cost of Capital use?
WACC = E ÷ (D + E) × cost of equity + D ÷ (D + E) × cost of debt × (1 − tax rate).