Weighted Average Cost of Capital Calculator

Weighted average cost of capital is a blended financing cost for common equity and debt. Enter the market values of both sources, their annual costs, and a tax rate assumed to apply to interest. The calculator weights each cost by its share of total capital and applies the assumed tax adjustment to debt cost.

For equity value of 800 and debt value of 200, total capital is 1,000 and the weights are 80% and 20%. With a 12% cost of equity, 6% pretax debt cost, and 25% assumed tax rate, after tax debt cost is 4.5%. The weighted contributions are 9.6 and 0.9 percentage points, producing 10.5% WACC.

Use WACC for cash flows available to both debt and equity providers, such as unlevered free cash flow in an enterprise valuation. Equity cash flows are normally matched with a cost of equity assumption. Keep market values, financing costs, currency, and valuation date on a consistent basis.

Recalculate when capital values, financing costs, or the usable tax assumption change. Compare a range of inputs because WACC is an estimate for the stated capital structure and date, not a permanent company rate.

Enter equity market value USD 800, debt market value USD 200, cost of equity 12%, pretax cost of debt 6%, and an assumed tax rate of 25%. Total capital is USD 1,000, so equity and debt weights are 80% and 20%.

After tax debt cost is 6% × (1 − 25%) = 4.5%. Equity contributes 80% × 12% = 9.6 percentage points, and debt contributes 20% × 4.5% = 0.9 points. WACC is 9.6 + 0.9 = 10.5%. The tax adjustment is an assumption, not confirmation that the full shield is available.

Use WACC as a transparent blended financing cost when analyzing enterprise cash flows or comparing financing assumptions. The result depends on the market value weights, annual financing costs, and modeled tax assumption you enter.

Estimate the cost of equity and pretax debt cost separately, confirm the values share a currency and date basis, and consider whether the modeled tax shield can be used. Test alternative inputs rather than treating one result as fixed.

Use market values for equity and debt from a consistent valuation date and currency. Do not combine equity market capitalization with debt measured in another currency or from a materially different date.

Enter a pretax cost of debt because the calculator applies the assumed tax adjustment. Match the discount rate to the cash flow: WACC for cash flows to all capital providers and cost of equity for equity cash flows.

This model includes common equity and debt only and assumes the entered tax rate can be applied to interest. It does not establish legal deductibility or actual tax capacity. It does not separately model preferred stock, leases, or other claims; entered debt may include them. Cash, fees, changing capital structure, and project specific risk are also outside the model. Use consistent market values, currency, valuation date, and annual costs. WACC is generally matched with cash flows available to all capital providers, not equity cash flows. The result is not a recommended rate or personalized financial advice.

Use CAPM Expected Return to estimate the cost of equity. The DCF Valuation tool models FCFE with a cost of equity assumption. A separate firm valuation typically pairs WACC with FCFF. ROE DuPont Analysis separates accounting profitability into components.

Compare WACC with a return measure only when both use compatible operating and financing definitions. A sensitivity table can show how alternative discount rate assumptions affect a valuation.