Wacc Calculator

Background.

Every dollar a company puts to work came from someone who expects to be paid for it. Shareholders look for a return through dividends and a rising share price; lenders look for interest. The weighted average cost of capital blends those two demands into one rate, each weighted by how much of the company's financing it supplies at today's market value. The result is the return the company's ordinary investments must earn just to keep both groups whole. Analysts use it as the discount rate when they value a business from its future cash flows, and finance teams use it as the hurdle a new project of average risk has to clear.

Debt usually pulls the average down, for two reasons. Lenders are paid before shareholders and stand on firmer ground if things go wrong, so they accept a lower rate. And in the US and many other tax systems interest is a deductible expense, so a 6% loan costs a company paying a 25% marginal tax rate only 4.5% once the tax saving is counted. Dividends get no such treatment; they are paid out of profit that has already been taxed.

The arithmetic is the easy part. The cost of equity cannot be read off any financial statement: it has to be estimated, usually with the capital asset pricing model, and careful analysts working from the same company can land a couple of percentage points apart. Because valuations are sensitive to the discount rate, that disagreement often matters more than anything else in the calculation.

The page covers the two-source case, common equity and interest-bearing debt, weighted by the market values you enter. Preferred shares, issuance costs, a target capital structure that differs from today's and tax shields that change from year to year are left out. If any of those is material for your company, treat the result as a starting point, not the final rate.

What is wacc calculator?

WACC is the average annual rate of return a company must offer its providers of capital, with each source weighted by its share of total financing measured at market value. In the two-source form used here, the equity weight is the market value of equity divided by equity plus debt, the debt weight is the remainder, and debt enters at its after-tax cost because interest payments reduce taxable income. The rate reflects the risk of the company's existing business taken as a whole, not the risk of any single new project.

How to use this calculator.

1. 01Enter Market value of equity: share price multiplied by shares outstanding for a listed company. For a private company, a recent funding-round valuation or one based on comparable firms is the usual substitute, since balance-sheet equity can sit far from market value.
2. 02Enter Market value of interest-bearing debt: bonds, bank loans and notes. Leave out accounts payable and other liabilities that carry no interest. Where the debt does not trade, its book value is the common stand-in.
3. 03Enter Cost of equity as a percentage, 12 for 12%. Under the capital asset pricing model it is the risk-free rate plus beta times the equity risk premium.
4. 04Enter Pre-tax cost of debt as the rate the company would pay to borrow today, such as the yield to maturity on its long-term bonds, not the coupon fixed on loans taken out years ago.
5. 05Enter the Marginal tax rate. If the company has no taxable profit for the interest to shelter, enter 0, because the deduction saves nothing in that case.

The formula.

WACC = E/(D + E) × Re + D/(D + E) × Rd × (1 − T). E and D are the market values of equity and debt, so E/(D + E) and D/(D + E) are the two shares of financing and always add up to one. Re is the cost of equity, Rd the pre-tax cost of debt and T the marginal tax rate; the product Rd × (1 − T) is the after-tax cost of debt, reported as the second result. Rates go in as percentages and the answer comes out as a percentage per year. Because the cost of equity is normally the larger of the two rates and the harder to pin down, it moves the answer most when equity makes up most of the capital. Either value may be zero, in which case WACC is simply the cost of the source that remains, but the two cannot both be zero: with no capital there is nothing to weight. The formula treats Re and Rd as fixed numbers, so it does not by itself capture how a change in borrowing alters them.

A worked example.

Frequently asked questions.

References& sources.

1. [1]OpenStax, Rice University. Principles of Finance, 2022. Chapters 6–10. Retrieved 2026-08-06.
2. [2]U.S. Internal Revenue Service. Tax guidance current 2026. Official forms, instructions and tax topics. Retrieved 2026-08-06.
3. [3]U.S. Securities and Exchange Commission. Investor.gov current 2026. Investment products and risk. Retrieved 2026-08-06.