WACC calculator
What a company pays for its money: equity and debt, weighted by how much of each.
Fill it from a company
Illustrative inputs
Market value: shares outstanding times the share price. Not book equity.
Interest-bearing debt from the balance sheet. Filed; book value stands in for market value.
The return shareholders require. Always your estimate: no filing states it.
Before tax: interest expense over average debt, or the yield on its bonds.
The marginal rate interest is deducted at. The US federal statutory rate is 21%.
WACC
7.99%
Equity adds 7.20%, debt adds 0.79%.
Show the working
| Step | Value |
|---|---|
| Total capital, E + D | 1,000 |
| Equity weight, E / V | 80.00% |
| Debt weight, D / V | 20.00% |
| Cost of debt after tax, Rd x (1 - t) | 3.95% |
| Equity contribution | 7.20% |
| Debt contribution | 0.79% |
| Weighted average cost of capital | 7.99% |
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How it works
WACC = E/V x Re + D/V x Rd x (1 - t)
- V is equity plus debt. Each weight is that part's share of V.
- Debt is taken at (1 - t) because interest is deductible and dividends are not.
- Two inputs are filed: debt and the tax rate. The cost of equity is always an estimate.
Reading the result
The bar is your capital: equity in ink, debt in grey. Each part times its cost is its contribution, and the two contributions add up to the WACC.
No cohort is shown: nobody files a WACC, and three of the five inputs are estimates.
Questions
Where does the cost of equity come from?
It is an estimate, never a filed figure. The usual method is the capital asset pricing model: the risk-free rate plus beta times the equity risk premium, which cannot be observed. So the choice stays with you.
Why market values rather than book values?
The weights should reflect what each claim is worth today, so equity uses the share price. Book debt stands in for market debt because most corporate debt does not trade.
Why is the cost of debt taken after tax?
Interest is deductible, so each unit of interest costs the company less than it pays. Multiplying by one minus the tax rate gives the cost the company actually bears.
What does a ticker fill in?
Two boxes of the five: the market value of equity and the debt beside it, both in millions, derived from the market capitalisation, price to book and debt to equity this site publishes. The three costs are estimates and stay yours.
What is a WACC used for?
Mostly as the discount rate in a discounted cash flow. Valuations are sensitive to it, so it is worth running at the low and the high end of your estimates.
What this leaves out
- One rate for the whole company, though its divisions may carry very different risk.
- Leases, preference shares and convertibles are capital this formula leaves out.
- A careful WACC built on a guessed cost of equity is still a guess.
Next step
The same five-number habit, one step on: your cash flow, your growth, and this rate as the discount.
The arithmetic runs in your browser, so the numbers you type never leave it. A ticker in the address is read on this site to look the company up, and goes nowhere else. Disclaimer.