WACC Calculator
Blend the cost of equity and the after-tax cost of debt by their market weights to find a company's weighted average cost of capital.
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Enter the capital values and costs to see WACC.
Worked example
With these example inputs:
- Equity value$1,200
- Debt value$300
- Cost of equity9.5%
- Cost of debt6%
- Tax rate19%
WACC: 8.57%
- Weight of equity80.0%
- Weight of debt20.0%
- After-tax cost of debt4.86%
Frequently asked questions
What is WACC?
The weighted average cost of capital is the blended rate a company pays to finance its assets, weighting equity and debt by their share of total capital.
Why is the cost of debt taxed?
Interest is usually tax-deductible, so the real cost of debt is lower than the headline rate. WACC uses the after-tax cost to reflect this saving.
What is WACC in simple terms?
WACC stands for weighted average cost of capital. It is the average rate a company pays to fund itself, blending the cost of its equity and its debt. Each source is weighted by how much of the total funding it makes up. So a firm that is mostly equity will have a WACC closer to its cost of equity.
How does the tool work out the rate?
It splits the funding into equity and debt by the values you enter. It multiplies the cost of equity by the equity weight, and the after-tax cost of debt by the debt weight, then adds them. For the sample inputs, that blend works out to about 8.3 percent. The debt cost is reduced first because interest is tax deductible.
Why is only the debt cost adjusted for tax?
Interest paid on debt can usually be deducted before tax, which lowers its true cost to the company. Dividends and other returns to equity holders get no such deduction, so the cost of equity is used as is. That is why the tool multiplies only the cost of debt by one minus the tax rate. It is a key reason debt often looks cheaper than equity.