This WACC calculator computes the weighted average cost of capital — the blended rate a company pays for its money, and the discount rate behind most DCF valuations.

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WACC = (E/V)·Re + (D/V)·Rd·(1−Tax) — One Rate to Discount Them All

The rate in action, valuing projects, is our NPV Calculator. Part of our Finance Calculators collection.

Worked Example (Verified)

  • 60% equity at 10%, 40% debt at 6%, 25% tax (defaults): WACC = 6.00 + 1.80 = 7.80% — debt’s after-tax cost is 4.5%, which is the entire tax-shield sermon in one number
  • Cost of equity usually comes from CAPM: Re = Rf + β×(market premium) — 3.5% + 1.3×5% = 10.0%, which is where the default took its 10
  • Sensitivity: a 1-point WACC change routinely swings a DCF valuation 10–20% — terminal values amplify the discount rate, which is why valuation fights are WACC fights

WACC Discipline

  • Weights at market value, target structure — not whatever the balance sheet happens to hold today.
  • Match the rate to the cash flows: firm cash flows (FCFF) pair with WACC; equity cash flows pair with cost of equity alone.
  • Private-company inputs need judgment (size premiums, illiquidity) — disclose them; a false-precision WACC is worse than a range.
  • WACC assumes the capital structure holds roughly steady; LBO-shaped situations break the assumption deliberately.

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Frequently Asked Questions

How do you calculate WACC?

WACC = (E/V × cost of equity) + (D/V × cost of debt × (1 − tax rate)). With 60/40 weights, 10% equity cost, 6% debt cost and 25% tax: 0.6×10 + 0.4×6×0.75 = 7.80%. This calculator shows the build-up, including the after-tax cost of debt.

Why is debt’s cost multiplied by (1 − tax)?

Interest is tax-deductible, so the treasury subsidizes debt: a 6% loan at a 25% tax rate effectively costs 4.5%. Equity dividends get no such deduction — the asymmetry is a deliberate feature of tax codes and a driver of capital-structure choices.

What is WACC used for?

It’s the standard discount rate for valuing a firm’s operating cash flows (DCF) and the hurdle rate for capital projects: a project returning less than WACC destroys value even if its accounting profit is positive. Investment committees live by it.

Where does cost of equity come from?

Usually CAPM: Re = risk-free rate + beta × equity risk premium. A beta of 1.3, Rf of 3.5% and a 5% premium give 10.0%. Every input is debatable — which is why two honest analysts can land a point apart on the same company.

Should weights be book or market values?

Market. WACC prices the firm’s capital at what investors would pay today; book equity is an accounting residue. For private firms, use a target structure typical of comparable public companies and say so.

Is this WACC calculator free?

Yes — free, instant, no sign-up.