Equity Weight
60.00%
Weighted Average Cost of Capital Calculator
Calculate a company's blended cost of capital.
WACC
7.80%
Debt Weight
40.00%
After-Tax Cost of Debt
4.50%
How to use the Weighted Average Cost of Capital Calculator
The Weighted Average Cost of Capital Calculator is free and runs entirely in your browser — no sign-up, and nothing you enter leaves your device. It opens pre-filled with a realistic example, so you can see how it works before replacing any figure with your own; the results update as you type. Press Calculate to refresh the result panel, or Reset to return to the example.
The inputs it asks for:
- Market Value of Equity — a dollar amount.
- Market Value of Debt — a dollar amount.
- Cost of Equity — a percentage (enter 6 for 6%).
- Cost of Debt — a percentage (enter 6 for 6%).
- Corporate Tax Rate — a percentage (enter 6 for 6%).
The formula
WACC blends the cost of a company's equity and debt, weighted by how much of each it uses, with debt adjusted for its tax deductibility:
WACC = (E/V)·R_e + (D/V)·R_d·(1 − T_c)- E, D
- market value of equity and of debt
- V
- total capital, E + D
- R_e, R_d
- the cost of equity and the cost of debt
- T_c
- the corporate tax rate
Interest on debt is tax-deductible, so its effective cost is R_d·(1 − T_c) — the "tax shield" that makes debt cheaper than its headline rate.
Worked example
Using the example values — Market Value of Equity $600,000.00, Market Value of Debt $400,000.00, Cost of Equity 10%, Cost of Debt 6%, Corporate Tax Rate 25% — the Weighted Average Cost of Capital Calculator returns a WACC of 7.80%. It also reports Equity Weight (60.00%), Debt Weight (40.00%), After-Tax Cost of Debt (4.50%).
Prefer your own numbers? Change any field above and this recomputes instantly.
Key terms
- Cost of equity
- The return shareholders require — often estimated with CAPM.
- Cost of debt
- The effective interest rate a company pays on its borrowing.
- Tax shield
- The reduction in cost from interest being tax-deductible.
- Capital structure
- The mix of debt and equity a company uses to finance itself.
Frequently asked questions
What is WACC used for?
It's the standard discount rate for valuing a company or project — the blended return all its investors require, and the hurdle a new investment must clear.
Why is the cost of debt multiplied by (1 − tax)?
Because interest is tax-deductible: every dollar of interest lowers taxable income, so the government effectively subsidizes part of the borrowing cost.
Should I use book or market values?
Market values of equity and debt, in principle — they reflect what capital is worth today. Book values are a rough substitute when market figures aren't available.