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WACC Calculator

Calculate Weighted Average Cost of Capital (WACC) from equity, debt, and preferred stock — the minimum return your investors require.

🧮 Optional: Estimate Cost of Equity using CAPM

Risk-free rate (%)

Beta (β)

Expected market return (%)

Equity market value ($)

Debt market value ($)

Preferred stock value ($) (opt)

Cost of equity Re (%)

Cost of debt Rd (%)

Cost of preferred stock Rp (%)

Corporate tax rate (%)

⚠️ Please fill in all required fields with valid numbers.

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Common WACC (Weighted Average Cost of Capital)

Everyday Uses

Setting a hurdle rate

A business's WACC is the minimum return projects must beat — the yardstick for every investment decision.

Valuation homework

DCF valuations need a discount rate — WACC is the standard choice, calculated properly here.

Financing mix decisions

See how shifting between debt and equity funding changes your overall cost of capital.

MBA and CFA prep

Practice WACC mechanics with real numbers instead of abstract formulas.

Small input, large consequence

A single percentage point of WACC can swing a valuation by double digits. It deserves far more scrutiny than it usually receives in a model.

Country and currency risk

Operations in volatile economies carry a genuine risk premium. Applying one global rate across a multinational understates the cost of capital in exactly the markets where it matters.

Frequently Asked Questions

What is WACC and what is it used for?

WACC (Weighted Average Cost of Capital) is the blended rate a company must earn on its assets to satisfy all capital providers — equity holders, debt holders, and preferred stockholders. It is used as the discount rate in DCF valuations, as a hurdle rate for investment decisions, and to assess whether new projects create or destroy shareholder value.

What is the WACC formula?

WACC = (E/V × Re) + (D/V × Rd × (1 − Tc)) + (P/V × Rp), where E = equity value, D = debt value, P = preferred stock value, V = E + D + P (total capital), Re = cost of equity, Rd = cost of debt, Rp = cost of preferred stock, Tc = corporate tax rate.

Why is debt multiplied by (1 − tax rate) in WACC?

Interest on debt is tax-deductible in most jurisdictions. A company paying 8% interest on debt with a 25% tax rate effectively only pays 6% after tax (8% × (1 − 0.25) = 6%). This tax shield makes debt cheaper than equity, which is why companies use it in their capital structure.

How is the cost of equity estimated for WACC?

The most common method is CAPM: Re = Risk-free rate + Beta × Equity Risk Premium. Using 2024 US figures: Re = 4.5% (10-yr Treasury) + 1.1 (beta) × 5.5% (ERP) = 10.55%. Beta measures a stock's volatility relative to the market; a Beta > 1 means higher risk and therefore higher required return.

What is a typical WACC for companies in 2024?

WACC varies significantly by industry and risk profile. Large US companies typically have WACCs of 8–12%. Technology companies tend to be 10–15% (higher equity weighting, higher beta). Utilities and infrastructure tend to be 6–8% (stable cash flows, high debt). Use industry benchmarks to sense-check your WACC calculation.

How to calculate WACC

Weight each source of capital by its share of the total, then blend the costs: WACC = (E÷V × Re) + (D÷V × Rd × (1 − tax rate)). Debt is multiplied by (1 − tax) because interest is deductible; equity is not.

WACC examples

$600k equity @10%, $400k debt @6%, 21% tax: 7.90%60/40 split — the tax shield takes debt’s effective cost to 4.74%.
$700k equity @12%, $300k debt @7%, 25% tax: 9.98%
All equity @10%: 10.00%No debt, no tax shield — WACC is just the cost of equity.

What WACC is used for

It is the discount rate in a DCF and the hurdle a project has to clear: a return below WACC destroys value even while it looks profitable. It is a modelling input, not investment advice, and it is only as good as the cost of equity you feed it.