WACC Calculator

How to use the WACC Calculator

1. 1Enter equity, debt, the cost of each and the tax rate.
2. 2Pick the units or options from the menus if the WACC tool offers them.
3. 3Read the WACC in the large result box.
4. 4Look at the extra rows for related figures.
5. 5Press Copy result to keep the answer.

When you need the WACC

Analysts use it as a discount rate in discounted cash flow models, and managers use it as the minimum return a project must beat.

Debt is usually cheaper than equity because interest is tax deductible and lenders have a first claim, so more debt tends to lower the WACC until the risk of borrowing too much pushes costs up.

How the WACC is worked out

WACC = E ÷ (E + D) × cost of equity + D ÷ (E + D) × cost of debt × (1 − tax rate). With equity of 600 and debt of 400, a cost of equity of 10%, a cost of debt of 5% and tax of 25%: 0.6 × 10% + 0.4 × 5% × 0.75 = 6% + 1.5% = 7.5%.

Every answer on this page comes from that one rule, so you can check any result by hand with a calculator. The figures shown underneath, such as other units, are conversions of the same answer.

• Shows the weights
• After-tax cost of debt
• Clear errors for empty capital

Mistakes to avoid with WACC

Use market values for equity and debt, not book values, when you can. And enter the cost of debt before tax, since the tool applies the tax rate itself.

On phone and computer

On a phone, type into the boxes one after another and read the WACC underneath; Copy result puts it on the clipboard for a message or a note. On a computer the inputs sit on the left and the answer on the right, so you can change one figure and watch the WACC move. The wacc calculator works the same on both.

Checking your WACC by hand

A good habit is to test the wacc calculator with a case you already know. With equity of 600 and debt of 400, a cost of equity of 10%, a cost of debt of 5% and tax of 25%: 0.6 × 10% + 0.4 × 5% × 0.75 = 6% + 1.5% = 7.5%.

If your own figures give a surprising answer, repeat the working yourself: WACC = E ÷ (E + D) × cost of equity + D ÷ (E + D) × cost of debt × (1 − tax rate). Small differences usually come from rounding, from mixing units, or from a typing slip in one of the inputs. WACC gives a company a single cost of money. Find the cost of equity with the CAPM Calculator, use WACC as a discount rate in the NPV Calculator, and test a project's return with the IRR Calculator.

Features

• Use market values
• Enter cost of debt before tax
• Do not reuse the tax rate twice
• Clear messages when the WACC inputs make no sense
• Copy the result with one tap
• Private: nothing is uploaded

Frequently asked questions