WACC Calculator
Enter a company's equity and debt values, cost of equity (or the CAPM inputs) and cost of debt to get its weighted average cost of capital, with the formula worked through using your numbers and a table showing how WACC changes with beta.
WACC calculator
WACC at different betas
WACC formula
WACC = E/V × Re + D/V × Rd × (1 − T) (+ P/V × Rp if there's preferred stock), where E, D and P are the market values of equity, debt and preferred stock, V is their total, Re the cost of equity, Rd the pre-tax cost of debt and T the tax rate.
Example: $600M of equity and $400M of debt. CAPM cost of equity = 4.3% + 1.1 × 5.5% = 10.35%. Debt at 6% with a 25% tax rate costs 4.5% after tax. WACC = 0.6 × 10.35% + 0.4 × 4.5% = 8.01%.
- Tax rate: the US federal corporate rate is 21%; adding state taxes typically gives 24–27%.
- Risk-free rate: analysts usually use the current 10-year Treasury yield (check today's rate at Treasury.gov).
- Market values: use market capitalization for equity and the market (or book) value of interest-bearing debt, not total liabilities.
- Use: WACC is the discount rate for a company's free cash flows in a DCF valuation, and the minimum return a new project should earn.
Common questions
How do I calculate WACC?
Weight the cost of each source of capital by its share of the total: E/V × cost of equity + D/V × cost of debt × (1 − tax rate).
Why is the cost of debt multiplied by (1 − tax rate)?
Interest is tax-deductible for companies, so each dollar of interest costs less after tax.
What is a typical WACC?
Many large US companies fall somewhere around 6–10%, higher for riskier or smaller firms. It changes with interest rates.
How do I find the cost of equity?
Most analysts use CAPM: risk-free rate + beta × equity risk premium. With a 4.3% risk-free rate, beta 1.1 and a 5.5% premium, that's 10.35%.
Should I use book or market values?
Market values for equity. For debt, market value is preferred but book value is a common stand-in when bonds don't trade.
Sources
- Internal Revenue Service: Corporate income tax rate (21%)
- U.S. Treasury: Daily Treasury par yield curve rates
- Investor.gov (SEC): Beta and investment risk
Related
General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.