WACC calculator

WACC calculator: what it is for

Calculate a company's WACC from the value of equity, debt, the cost of equity, the cost of debt and the tax rate. The cost of equity can be typed directly or calculated with CAPM (risk-free rate + beta × market premium). The chart shows the capital structure and how much each part contributes to the final rate, which is the one used to discount cash flows in a valuation. Educational tool: results are estimates, not investment advice.

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How to use

1. Enter equity and debt.
2. Fill in CAPM or the cost of equity.
3. Enter the cost of debt and the tax rate.

When to use it

• Set the discount rate for a valuation.
• Check whether a project earns more than the cost of capital.
• Study corporate finance.

Frequently asked questions

What is WACC?

WACC (Weighted Average Cost of Capital) is the average cost a company pays for the money it uses, combining what shareholders expect to earn and the interest on debt, each by its weight. It is the rate used to discount cash flows in a valuation.

What is the formula?

WACC = E/(E+D) × Ke + D/(E+D) × Kd × (1 − T). E is the value of equity, D is debt, Ke the cost of equity, Kd the cost of debt and T the tax rate.

How do I calculate the cost of equity?

The most common way is CAPM: Ke = risk-free rate + beta × market risk premium. Tick the CAPM option and enter those three numbers, or type Ke directly.

Why is debt cost reduced by taxes?

Because interest paid is a tax-deductible expense: every $100 of interest lowers the tax owed. That is why the effective cost of debt is Kd × (1 − T).

Is it really free?

Yes, 100% free. No sign-up, no subscription and no usage limits. All Tools123 are free.

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