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WACC Calculator

Weighted average cost of capital estimates the blended return required by a company's equity and debt providers. It is commonly used to discount unlevered free cash flow in a DCF.

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WACC Calculator

Enter your assumptions and select Calculate. Values stay in your browser.

Formula behind the calculator

WACC = E/(D+E) × Rₑ + D/(D+E) × R𝒹 × (1 − T)

Equity and debt are weighted by market value. The cost of debt is adjusted for the tax shield created when interest is tax deductible.

How to use it

  1. 1Use market capitalization for equity and a reasonable market-value estimate for debt.
  2. 2Estimate the cost of equity consistently, often with CAPM or an opportunity-cost approach.
  3. 3Use the company's current marginal borrowing cost and expected marginal tax rate.
  4. 4Stress-test the result instead of treating one WACC estimate as exact.

Interpret the result

  • WACC is a required return, not a historical accounting expense. A higher WACC reduces the present value of future cash flows.
  • The rate should match the cash flow being discounted. WACC fits unlevered free cash flow; cost of equity fits cash flow available only to shareholders.
  • For valuation, a range such as base WACC plus or minus one percentage point is usually more informative than false precision.

Go deeper

WACC explained

Learn how each component is estimated.

Reverse DCF calculator

Translate a discount rate into market-implied growth.

DCF calculator

Use WACC in a simplified cash-flow valuation.

Frequently asked questions

Should WACC use market or book values?

Market values are conceptually correct because WACC measures investors' current opportunity costs. Debt book value is often used when market value is unavailable.

Why is debt adjusted for tax?

When interest is deductible, one dollar of interest reduces taxable income and lowers the effective cost of debt.

Can WACC be lower than the cost of debt?

It is unusual but possible under unusual inputs. Check whether the cost of equity, debt values or tax assumptions are realistic.

Does a company have one permanent WACC?

No. Capital structure, interest rates, business risk and market risk premiums change over time.

Is WACC suitable for every project?

Only when the project has risk similar to the existing business. A project with different risk needs an adjusted discount rate.