What is the WACC with 60% equity at 10% and 40% debt at 5%, taxed at 25%?
7.5%
With 60% equity costing 10% and 40% debt costing 5% before a 25% tax shield, the weighted average cost of capital is 7.5%.
How it is worked out
Weight each source of capital by its share of the total, then blend the costs. Debt is multiplied by (1 − tax rate) because interest is deductible; equity is not.
(60% × 10%) + (40% × 5% × (1 − 25%)) = 7.5%
The tax shield takes debt's effective cost from 5% to 3.75%.
Open the full WACC calculator to use your own figures.
Similar questions
- 60/40 · 10% / 5% · 21% tax = 7.58%
- 60/40 · 10% / 6% · 21% tax = 7.9%
- 60/40 · 10% / 6% · 25% tax = 7.8%
- 60/40 · 10% / 8% · 21% tax = 8.53%
- 60/40 · 10% / 8% · 25% tax = 8.4%
- 60/40 · 8% / 8% · 21% tax = 7.33%
Questions
- What is the WACC with 60% equity at 10% and 40% debt at 5%, taxed at 25%?
- With 60% equity costing 10% and 40% debt costing 5% before a 25% tax shield, the weighted average cost of capital is 7.5%. (60% × 10%) + (40% × 5% × (1 − 25%)) = 7.5%.
- How is this worked out?
- Weight each source of capital by its share of the total, then blend the costs. Debt is multiplied by (1 − tax rate) because interest is deductible; equity is not.
- Can I use my own figures?
- Yes — the WACC calculator takes any values and shows the full result.