Weighted Average Cost of Capital (WACC) Calculator

WACC = (E / (E+D)) x cost of equity + (D / (E+D)) x cost of debt x (1 - tax rate), where E is the market value of equity and D is the market value of debt. The tax rate discount on debt reflects that interest payments are usually tax deductible. Defaults: $6M equity, $4M debt, 12% cost of equity, 6% cost of debt, 25% tax rate gives a 9.00% WACC.

Interest paid on debt is typically deductible against taxable income, so the true after-tax cost of debt is lower than the stated rate. Dividends and buybacks that reward equity holders are not deductible, so cost of equity is used as-is.

Cost of equity is commonly estimated with CAPM (risk-free rate + beta x equity risk premium). Cost of debt is usually the yield to maturity on existing debt or the rate on a recent loan. This page does not compute either input for you -- it blends whatever you enter.

WACC is the standard discount rate for a company's overall future cash flows in a DCF valuation, and the hurdle rate many companies use to accept or reject internal projects.