WACC Calculator
Find the weighted average cost of capital for valuation, project screening, and hurdle-rate analysis. The calculation blends cost of equity and after-tax cost of debt using capital structure weights.
Use market value when available rather than book value.
Interest-bearing debt used in the capital structure.
Often estimated using CAPM or a similar required return method.
Average interest rate on the company debt.
Used to calculate the after-tax cost of debt.
E = equity value, D = debt value, V = total capital, Re = cost of equity, Rd = pre-tax cost of debt, Tc = tax rate.
What is WACC?
Weighted Average Cost of Capital is the blended cost a company pays for its financing, based on both equity and debt. It is commonly used as a hurdle rate in valuation, capital budgeting, and discounted cash flow models.
Why is debt adjusted for taxes in WACC?
Interest expense is often tax-deductible, which lowers the effective cost of debt. That is why WACC uses after-tax cost of debt rather than the headline borrowing rate alone.
Should I use market value or book value?
Market values are usually preferred for valuation work because WACC is intended to reflect current investor-required returns and current capital structure weights. Book values may be used only when market data is not practical.
How does WACC affect valuation?
A higher WACC means future cash flows are discounted more heavily, which lowers present value. A lower WACC increases valuation because the business is assumed to face a lower overall required return from investors.
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📐 Formula
E = equity value, D = debt value, V = total capital, Re = cost of equity, Rd = pre-tax cost of debt, Tc = tax rate.