Free wacc calculator
See exactly what it costs your company to raise capital. Enter the market value of equity and debt, the cost of each, and your tax rate. The calculator returns your weighted average cost of capital, the equity and debt weights, and the after-tax cost of debt — updated live, as you type.
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Estimates only, based on the values you enter. Not investment advice.
Results are estimates. Consult a professional.
What is WACC (weighted average cost of capital)?
A company's weighted average cost of capital, or WACC, is the blended rate of return it must earn to satisfy everyone who funds it — both shareholders and lenders. It weights the cost of each source of capital by how much of the firm's value that source represents, then blends them into a single percentage. That percentage is the minimum return a new project must clear to create value, and it is the discount rate analysts use to value the whole business. This WACC calculator returns that blended rate the moment you enter your equity, debt, and their costs.
Two ideas sit underneath it. First, capital is not free: equity investors expect a return (the cost of equity) and lenders charge interest (the cost of debt). Second, those two costs are different and a firm uses different amounts of each — so the true cost of funding is a weighted average, not a simple one. WACC is that weighted average, adjusted for the fact that interest on debt is tax-deductible.
The WACC formula
WACC takes the cost of each type of capital, multiplies it by that capital's share of the total, and adds the pieces together. The debt term is multiplied by (1 − tax rate) to capture the tax deduction on interest:
How to calculate WACC step by step
Calculating WACC is a five-step process. Gather the two market values and the three rates, work out the weights, then blend:
- Find the market value of equity (E). For a public company this is the share price times shares outstanding — its market capitalization.
- Find the market value of debt (D). Use the market value of bonds and loans where you can; the book value of debt is an acceptable proxy when market quotes are unavailable.
- Estimate the cost of equity (Re). Most analysts use CAPM: Re = risk-free rate + beta × equity risk premium.
- Estimate the cost of debt (Rd). Use the yield to maturity on the firm's bonds or the interest rate on its loans, then multiply by (1 − Tc) for the after-tax cost.
- Weight and blend. Compute V = E + D, then apply the formula. The calculator above does steps 4 and 5 instantly as you type.
Cost of equity (Re) — the CAPM method
The cost of equity is the trickiest input because shareholders never send an invoice — their required return is implied, not stated. The standard way to estimate it is the Capital Asset Pricing Model (CAPM), which equates required return to risk: a riskier stock must offer a higher return to attract investors.
Beta measures how much the stock moves relative to the market: a beta of 1 moves with the market, above 1 is more volatile, below 1 is less. A high-beta technology stock therefore has a higher cost of equity than a low-beta utility. Once you have an Re figure from CAPM, enter it in the cost of equity field above — the calculator does not need the individual CAPM inputs, just the resulting rate.
Cost of debt (Rd) and the tax shield
The cost of debt is the effective rate a firm pays on its borrowings — the yield to maturity on its bonds, or the weighted interest rate across its loans. It is usually lower than the cost of equity because lenders are paid before shareholders and often hold collateral, so they take less risk.
Debt has one more advantage: interest is tax-deductible. A firm paying 6% interest in a 21% tax bracket has an after-tax cost of debt of 6% × (1 − 0.21) = 4.74%. This tax shield is the reason the (1 − Tc) term appears in the WACC formula, and it makes moderate borrowing a genuinely cheaper source of capital than equity.
A worked example using the WACC calculator
A company is financed by $600 million of equity and $400 million of debt. Its cost of equity is 9%, its pre-tax cost of debt is 6%, and its tax rate is 21%. Here is how the calculator gets from those five inputs to a single WACC.
Step 1 — Work out the weights
Total capital is V = $600M + $400M = $1,000M. So equity is 60% of the structure (600 ÷ 1,000) and debt is 40% (400 ÷ 1,000). These weights decide how much each cost contributes to the blend.
Step 2 — Tax-adjust the cost of debt
The 6% pre-tax cost of debt becomes 6% × (1 − 0.21) = 4.74% after the tax shield. The cost of equity stays at 9% — equity gets no tax adjustment.
Step 3 — Blend the components
| Source | Weight | After-tax cost | Contribution |
|---|---|---|---|
| Equity | 60% | 9.00% | 5.40% |
| Debt | 40% | 4.74% | 1.90% |
| WACC | 100% | — | 7.30% |
Each contribution is weight × after-tax cost; WACC is their sum.
What it means. This firm must earn at least 7.30% on its projects to keep both its shareholders and its lenders whole. A project expected to return 10% creates value; one expected to return 5% destroys it. And 7.30% is the discount rate you would use to value the company's future cash flows.
What is a good WACC?
There is no single 'good' WACC — like a good interest rate, it depends on the company and its industry. The general rule is that a lower WACC is better: it means capital is cheaper, the hurdle for new projects is easier to clear, and the firm's cash flows discount to a higher value. A high WACC signals that investors see more risk and demand more return to fund the business.
The most useful test is relative: compare a company's WACC to its industry average and to its own expected returns. A WACC below the returns the firm can earn on its investments is healthy; a WACC above them means the company is struggling to create value. Risk drives most of the spread between industries — stable, regulated businesses sit low; volatile, high-growth ones sit high.
| Sector type | Typical WACC range | Why |
|---|---|---|
| Utilities & regulated | 5–8% | Stable, predictable cash flows and low beta |
| Consumer staples | 6–9% | Steady demand, modest growth, moderate risk |
| Industrials & retail | 8–11% | Cyclical earnings tied to the economy |
| Technology & biotech | 10–15%+ | High beta, volatile earnings, growth risk |
Illustrative ranges — actual figures move with interest rates and individual company risk. Use them only to sanity-check your own result.
What is WACC used for?
WACC is one of the most widely used numbers in corporate finance because it answers a single question — what does it cost this company to raise a dollar? — that sits at the heart of three different decisions:
- Valuation. In a discounted cash flow (DCF) model, WACC is the discount rate that converts a firm's future unlevered free cash flows into a present value. A lower WACC produces a higher valuation.
- Capital budgeting. WACC is the hurdle rate. A project whose internal rate of return exceeds WACC adds value; one below it does not. It is the bar every investment must clear.
- Performance measurement. Comparing returns on invested capital to WACC shows whether a business is creating or destroying economic value — the basis of metrics like economic value added (EVA).
WACC pairs naturally with the tools it feeds. Use it as the discount rate in a DCF business valuation, compare a project's IRR against it, or work alongside present value and ROI calculations.
Limitations and common mistakes
WACC is a powerful single number, but it rests on estimates — and small input errors compound into large valuation swings. Keep these limits in mind:
- The cost of equity is an estimate. CAPM inputs — beta, the risk-free rate, the equity risk premium — are judgment calls, and reasonable analysts disagree by a percentage point or more.
- It assumes a constant capital structure. WACC uses today's mix of debt and equity. If the firm plans to borrow much more or pay debt down, the single rate misstates future costs.
- Book values mislead. Using balance-sheet book values instead of market values distorts the weights, often understating the cost of equity's share.
- It is company-wide, not project-specific. A firm's WACC reflects its average risk; using it to evaluate a project that is far riskier or safer than the company as a whole will give the wrong answer.
Formula and sources
This calculator applies the standard WACC identity, WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc), exactly as defined in corporate-finance texts and references such as Corporate Finance Institute and Wall Street Prep. The cost of equity is conventionally estimated with the Capital Asset Pricing Model. Industry WACC ranges are illustrative and move with prevailing interest rates; for current figures, professionals reference datasets such as Damodaran Online.
Corporate Finance Institute — WACC formula and definition.Wall Street Prep — WACC guide with calculation example.Frequently asked questions about the free wacc calculator
About this WACC calculator
This WACC calculator runs entirely in your browser. Every figure you enter stays on your device — nothing is sent to a server, logged, or shared. It weights your cost of equity and after-tax cost of debt by each source's share of total capital, applies the standard WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc) formula, and updates instantly as you type.
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