Weighted Average Cost of Capital (WACC) Calculator

The Blended Cost of a Company's Money

A company funds itself with a mix of equity and debt, and each source has its own cost — equity investors demand a return, and debt carries an interest rate. WACC blends those two costs, weighted by how much of the company's capital structure each source represents, into a single rate. That rate is the minimum return a company's investments need to clear just to cover the cost of the capital funding them, which is why it shows up as the standard discount rate in most corporate valuation work.

The Formula

E is the market value of equity, D is the market value of debt, and V is the total (E + D). R_e is the cost of equity and R_d is the cost of debt. The debt term is adjusted by (1 − Tax Rate) because interest payments are tax-deductible, effectively lowering the real cost of debt financing.

Where This Matters

• Discounted cash flow valuation — WACC is the standard discount rate applied to a company's projected free cash flows when estimating enterprise value.
• Capital budgeting hurdle rate — a project should generally only be funded if its expected return exceeds the company's WACC, since anything less destroys value net of financing cost.
• Capital structure decisions — because debt is tax-advantaged and often cheaper than equity, shifting the equity/debt mix changes WACC, which is part of why companies weigh how much debt to carry.

Worked Example

(0.70 × 10%) + (0.30 × 5% × (1 − 21%)) = 7.0% + 1.185% = 8.185%.

How to Use This Calculator

1. Enter the market value of equity.
2. Enter the market value of debt.
3. Enter the cost of equity (often estimated via CAPM).
4. Enter the cost of debt (the interest rate on outstanding debt).
5. Enter the applicable tax rate (optional).
6. Select Calculate to get the weighted average cost of capital.

Related Calculations

Estimate the cost of equity input with the CAPM Calculator, then apply this WACC as the discount rate in the Net Present Value (NPV) Calculator.