WACC Calculator
Enter the market value of equity, market value of debt, cost of equity, cost of debt, and corporate tax rate to calculate the weighted average cost of capital.
Reviewed by the ToolNestr Editorial Team — July 2026
How WACC is calculated
WACC is the weighted average of the cost of equity and the after-tax cost of debt: WACC = E/V × Re + D/V × Rd × (1 - Tc). E is equity value, D is debt value, V = E + D, Re is cost of equity, Rd is cost of debt, and Tc is the corporate tax rate. The debt component is reduced by the tax shield since interest payments are tax-deductible.
WACC reflects the blended return demanded by all of a company's capital providers. It is the critical input for investment decisions — a project should only be pursued if its expected return exceeds the WACC, as only then is the company creating value for its shareholders. A company with a lower WACC has a competitive advantage because it can accept projects with lower returns that competitors with higher WACC would have to reject.
Worked example
A company has $50M equity, $20M debt, 12% cost of equity, 5% cost of debt, and 21% tax rate.
About WACC
WACC is one of the most important concepts in corporate finance. It serves as the discount rate for valuing a company's future cash flows, as the hurdle rate for evaluating new investment projects, and as a benchmark for assessing financial performance. A company that consistently earns returns above its WACC is creating shareholder value; one that earns below WACC is destroying it. Use the NPV Calculator to apply WACC as a discount rate, or the IRR Calculator to find the return rate that matches a project's break-even WACC.
How to use it
- Enter the market values of equity and debt (share price × shares outstanding for equity; book or market value of debt).
- Enter the cost of equity (estimated via CAPM or other model) and cost of debt (average interest rate).
- Enter the corporate tax rate and view your WACC, equity weight, and after-tax cost of debt.
When to use this tool
Financial analysts use WACC for DCF valuations, investment bankers use it for deal pricing and merger analysis, CFOs use it to set investment hurdle rates, and investors use it to evaluate whether a company's returns justify its cost of capital.
Tips for WACC
- Use market values (not book values) for the most accurate capital structure weights.
- Update WACC periodically — risk-free rates, credit spreads, and equity risk premiums change over time.
- For divisional or project-level analysis, adjust WACC for the specific risk profile rather than using the company-wide rate.
Financial Analyst
Calculate WACC for DCF valuations, comparable company analysis, and fairness opinions. Adjust WACC for different scenarios and capital structure assumptions.
CFO / Finance Team
Set the corporate hurdle rate for capital budgeting decisions. Evaluate whether proposed projects and acquisitions will generate returns above the cost of capital.
Investment Banker
Determine appropriate discount rates for merger models, LBO analyses, and transaction valuations. Present WACC assumptions in pitch books and fairness opinions.
Equity Investor
Evaluate whether a company's return on invested capital (ROIC) exceeds its WACC — a key indicator of competitive advantage and value creation potential.
How to use the WACC calculator
Enter capital structure
Input the market value of equity and debt. Equity value is the current share price times shares outstanding. Debt value can be the book or estimated market value.
Enter cost components
Provide the cost of equity (from CAPM or build-up method) and the cost of debt (effective interest rate on existing debt). Both as percentages.
Apply the tax rate
Enter the corporate tax rate. The calculator automatically adjusts the cost of debt for the tax shield, showing the after-tax cost of debt and the final WACC.
Tips for accurate WACC estimation
Use market values, not book values
WACC should reflect the current market-based cost of capital. Use the current stock price for equity market value and the current trading price or yield for debt. Book values may misrepresent the true economic cost of capital.
Estimate cost of equity carefully
The cost of equity is the most subjective input. Use CAPM with a beta from a reliable source, use a risk-free rate matching the company's duration (10-year Treasury), and an equity risk premium appropriate for the market (typically 4.5-6%).
Consider the marginal tax rate
Use the marginal corporate tax rate rather than the effective rate, since the tax shield benefit applies to the next dollar of interest. In the US, the federal rate is 21%, plus any state taxes that apply.
Related tools
- NPV Calculator — Discount future cash flows to present value using WACC as the discount rate.
- IRR Calculator — Find the internal rate of return and compare it to your WACC for investment decisions.
- ROI Calculator — Calculate simple return on investment for quick performance checks.
Frequently asked questions
What is WACC?
WACC (Weighted Average Cost of Capital) is the average rate of return a company must pay to all its capital providers — both debt holders and equity investors. It represents the minimum return a company must earn on its existing asset base to satisfy all investors.
How is WACC calculated?
WACC = (E/V × Re) + (D/V × Rd × (1 - Tc)). E is equity value, D is debt value, V = E + D, Re is cost of equity, Rd is cost of debt, and Tc is the corporate tax rate. The debt component is tax-adjusted because interest payments are tax-deductible.
What is the cost of equity?
The cost of equity is the return shareholders expect for investing in the company. It is typically estimated using the Capital Asset Pricing Model (CAPM): Re = Rf + β × (Rm - Rf), where Rf is the risk-free rate, β is the stock's volatility relative to the market, and (Rm - Rf) is the market risk premium.
What is the cost of debt?
The cost of debt is the effective interest rate a company pays on its borrowed funds. It is usually the yield to maturity on existing debt or the average interest rate on current outstanding loans and bonds.
Why is debt tax-adjusted in WACC?
Interest payments on debt are tax-deductible, which reduces the company's tax liability. This "tax shield" makes debt cheaper than equity on an after-tax basis. The formula multiplies the cost of debt by (1 - tax rate) to reflect this benefit.
What is a good WACC?
A good WACC varies by industry, company size, and market conditions. Generally, a lower WACC indicates cheaper financing and higher company value. Companies with stable cash flows and strong credit ratings typically have lower WACCs than high-growth or risky companies.
How is WACC used in valuation?
WACC is the discount rate used in Discounted Cash Flow (DCF) analysis to calculate the present value of future cash flows. The enterprise value is calculated by discounting projected free cash flows by the WACC. A higher WACC reduces the present value and vice versa.
Can WACC change over time?
Yes. WACC changes with market conditions (interest rates, equity risk premium), company-specific factors (credit rating changes, stock price volatility), and capital structure changes (issuing more debt or equity). It should be recalculated periodically.
What is the difference between WACC and cost of capital?
WACC is specifically the weighted average of all capital costs. Cost of capital is a broader term that can refer to any of the individual components (cost of equity, cost of debt) or the blended rate. WACC is the most commonly used blended measure.
How do I estimate the cost of equity for a private company?
For private companies, use the build-up method starting with the risk-free rate, adding an equity risk premium, a size premium, and an industry-specific risk premium. Comparable public company betas can also be used as a reference point.
Sources & references
This tool uses standard formulas and reference values from:
- • IRS — federal tax brackets, standard deduction and instructions for the tax year. irs.gov
- • U.S. SEC — Investor.gov, compound interest and investment reference material. investor.gov
- • Official national tax authority for the relevant country — link the exact rate schedule used.
Estimates only, not tax or financial advice. Confirm current figures with the official source or a qualified professional.