WACC Calculator
The weighted average cost of capital from the values and costs of equity, debt and preferred stock, with debt taken after tax, and the weight of each source.
Result
Weighted average cost of capital: 7.8%
Arithmetic on the values, costs and tax rate you enter. No typical cost of capital is given.
- Weight of equity
- 60%
- Weight of debt
- 40%
- Weight of preferred
- 0%
- Cost of debt after tax
- 4.5%
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Results are arithmetic estimates based on the assumptions you enter, not accounting, tax, investment or lending advice. Forecasts can be wrong and important decisions should be checked with a qualified adviser. Read the full disclaimer
How to use the WACC Calculator
- Enter the value of the company's equity and debt, and of any preferred stock.
- Enter the cost of each source, the cost of debt before tax, and the tax rate at which interest saves tax.
- Read the weighted average cost of capital and the weight of each source.
The formula
V = equity + debt + preferredWACC = (equity ÷ V) × cost of equity + (debt ÷ V) × cost of debt × (1 − tax rate) + (preferred ÷ V) × cost of preferredThe weights move the answer
Debt is usually cheaper than equity after tax, so shifting weight towards debt lowers the WACC on paper. It does not stay that simple: more debt makes both the debt and the equity riskier, and their costs rise. The page takes the costs you enter as given, so re-enter them if you change the mix.
What the diagram shows
The company’s capital as one bar split into equity, debt and preferred stock by value. Those shares are the weights in the average.
With your numbers
- Weights: equity 60%, debt 40% of $10,000,000.00
- Debt after tax = 6% × (1 − 25%) = 4.5%
- WACC = 60% × 10% + 40% × 4.5% = 7.8%
Quick reference
Arithmetic on the values, costs and tax rate you enter. No typical cost of capital is given.
| Example | Weighted average cost of capital |
|---|---|
| 60% equity at 10%, 40% debt at 6%, 25% tax | 7.8% |
| With 20% preferred at 8% | 8.759% |
| All equity at 9% | 9% |
| 75.6% equity at 13.4%, debt 4.99% after tax | 11.348% |
| Mostly debt: 30% equity at 14% | 7.875% |
| No tax saving on interest | 8.4% |
Common questions about the WACC Calculator
- Should I use market values or book values?
- Market values where you can: equity at the share price times the shares outstanding, and debt at what it would trade for. They show what investors put at risk today. Book values from the balance sheet are a fallback, and can differ a lot for equity.
- Why is debt taken after tax?
- Where interest is deductible, each unit of interest reduces tax by the tax rate, so debt costs the company less than its interest rate. 6% debt at a 25% tax rate costs 4.5% after tax. Dividends on shares are paid from profit after tax, so equity and preferred get no such reduction.
- Where does the cost of equity come from?
- Nobody publishes it; it is the return shareholders expect. It is usually estimated, often with the capital asset pricing model from a risk-free rate, the stock's beta and a market risk premium. The CAPM calculator does that arithmetic on figures you choose.
- What is WACC used for?
- As the discount rate for projects about as risky as the company as a whole: a project whose return beats the WACC adds value for the investors who fund it. A project much riskier or safer than the business needs its own rate.