Weighted Average Cost of Capital (WACC) Calculator

Weighted Average Cost of Capital (WACC) Calculator

The Weighted Average Cost of Capital (WACC) is one of the most important financial metrics for investors, analysts, and businesses. It represents the company’s average rate of return required by all capital providers both debt holders and equity investors. In simple terms, WACC reflects the cost a company must pay to finance its assets, projects, and operations.

Our WACC Calculator helps you quickly calculate this percentage using inputs such as Cost of Equity, Cost of Debt, Equity Value, Debt Value, and Corporate Tax Rate. By knowing your WACC, you can evaluate investment decisions, business expansion plans, and overall financial performance more effectively.

🔎 What is Weighted Average Cost of Capital (WACC)?

The WACC formula is:

Where:
E = Market value of equity
D = Market value of debt
V = E + D = Total capital
Re = Cost of equity
Rd = Cost of debt
Tc = Corporate tax rate

👉 Interpretation:
Lower WACC → Company can raise capital at a cheaper rate, improving profitability.
Higher WACC → Indicates higher risk or expensive financing, reducing investment attractiveness.

📚 Examples of Weighted Average Cost of Capital

Example 1

Cost of Equity (Re): 12%
Equity (E): $500,000
Cost of Debt (Rd): 6%
Debt (D): $200,000
Tax Rate (Tc): 25%

Step 1 – Calculate Total Capital (V):

Step 2 – Equity and Debt Weights:

Step 3 – Apply Formula:

✅ WACC = 9.857%
This company’s projects must generate returns above 9.857% to be considered profitable.

Example 2

Cost of Equity (Re): 15%
Equity (E): $300,000
Cost of Debt (Rd): 7%
Debt (D): $500,000
Tax Rate (Tc): 30%

Step 1 – Total Capital (V):

Step 2 – Equity and Debt Weights:

Step 3 – Apply Formula:

✅ WACC = 8.687%
Here, the company’s reliance on debt lowers its WACC due to the tax shield, but it also introduces higher financial risk.

Example 3

Cost of Equity (Re): 10%
Equity (E): $400,000
Cost of Debt (Rd): 5%
Debt (D): $400,000
Tax Rate (Tc): 20%

Step 1 – Total Capital (V):

Step 2 – Equity and Debt Weights:

Step 3 – Apply Formula:

✅ WACC = 7%
This company has a balanced mix of debt and equity, resulting in a relatively low WACC, making it more attractive to investors.

✨ Key Features of the WACC Calculator

💡 Why WACC Matters for Businesses and Investors

Investment Evaluation: Projects must exceed WACC to add value.
Capital Budgeting: Guides decisions on whether to use debt or equity financing.
Valuation Insight: Used in Discounted Cash Flow (DCF) models to value businesses.
Risk Management: Reflects the company’s overall financial risk profile.
Strategic Benchmarking: Helps compare financing costs across industries.