Calculator

Cost of Capital (WACC) Calculator

Blend the cost of debt and the cost of equity, weighted by how much of a company is financed by each, into a single discount rate.

← Read the Cost of Capital (WACC) concept page

Market value of equity

Market value of debt

Risk-free rate

Beta

Expected market return

Cost of debt (interest rate)

Tax rate

WACC

9.00%

the minimum return this company needs to earn on new investments

Cost of equity (CAPM)

12.00%

After-tax cost of debt

4.50%

Weight of equity

60.0%

Weight of debt

40.0%

Total capital

$10,000,000.00

How the math works

Cost of equity (CAPM): 3% + 1 × (12% − 3%) = 12.00%

Weight of equity: $6,000,000.00 / $10,000,000.00 = 60.0%
Weight of debt:   $4,000,000.00 / $10,000,000.00 = 40.0%

After-tax cost of debt: 6% × (1 − 25%) = 4.50%

WACC = (60.0% × 12.00%) + (40.0% × 4.50%)
     = 9.00%

This blended rate is what belongs in the discount rate slot of Net Present Value or DCF Valuation for this company — using just the cost of equity or just the cost of debt would misstate what the company actually needs to earn to satisfy everyone who financed it.