WACC Cost of Capital Estimator
Calculate Weighted Average Cost of Capital and optimize capital structure. Enter values for instant results with step-by-step formulas.
Formula
WACC = (E/V × Re) + (D/V × Rd × (1-T))
WACC is the weighted average of the Cost of Equity (Re) and the After-Tax Cost of Debt (Rd). E = Equity Value, D = Debt Value, V = Total Value (E+D). The debt component is multiplied by (1 - Tax Rate) because interest expense is tax-deductible.
Worked Examples
Example 1: Tech Company
Problem:$1M Equity (10% cost). $500k Debt (5% cost). 21% Tax.
Solution:Weights: E=67%, D=33%. Cost E: 6.7%. Cost D: 33% * 5% * 0.79 = 1.3%. Total: 8.0%.
Result:8.0% WACC
Frequently Asked Questions
What is WACC used for?
It is the discount rate used in DCF analysis to value a company. It is also the 'Hurdle Rate' for new projects; projects must return > WACC to create value.
How do I find Cost of Equity?
Use the CAPM formula: Risk Free Rate + Beta * (Market Risk Premium). For private companies, look at comparable public companies.
What is a typical WACC?
Large stable companies: 6-8%. High growth tech: 10-15%. Distressed companies: 20%+.
Is a lower WACC always better?
Generally yes, it means the company is funded cheaply and has a higher valuation. However, an artificially low WACC due to excessive dangerous debt is not sustainable.