WACC Calculator

Calculate Weighted Average Cost of Capital (WACC) for DCF valuation. Includes 3-component WACC with preferred stock, sensitivity analysis, book vs market weights, unlevered cost of capital, and tax shield.

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WACC
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Equity Weight (E/V) —
Debt Weight (D/V) —
After-Tax Cost of Debt —
Total Capital (V) —
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WACC (3-component)
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Equity Contribution —
Debt Contribution —
Preferred Contribution —
Professional Full parameters & maximum detail ▾
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WACC Estimates

WACC (Market Weights) —
WACC (Book Weights) —
Unlevered Cost of Capital (ρ) —

Capital Structure

Annual Interest Tax Shield —
D/E Ratio (Market) —

Assessment

Leverage Assessment —

How to Use This Calculator

  1. Enter Market Value of Equity (shares outstanding × stock price).
  2. Enter Market Value of Debt (total interest-bearing liabilities at market value).
  3. Enter Cost of Equity (from CAPM or build-up method).
  4. Enter Pre-tax Cost of Debt (yield to maturity on outstanding bonds or interest expense / debt).
  5. Enter the Tax Rate (marginal corporate rate, US federal = 21%).
  6. WACC is calculated instantly. Use Professional for unlevered cost and tax shield analysis.

Formula

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

Where V = E + D (total capital), T = corporate tax rate.

Example

Example: E = $800M, D = $200M, Re = 11.1%, Rd = 6%, T = 21%. V = $1B. We = 80%, Wd = 20%. WACC = 0.80×11.1 + 0.20×6.0×0.79 = 8.88 + 0.95 = 9.83%.

Frequently Asked Questions

  • WACC (Weighted Average Cost of Capital) is the average rate a company must earn on its assets to satisfy all investors. WACC = (E/V)×Re + (D/V)×Rd×(1−T). It is used as the discount rate in DCF valuations. A higher WACC means higher required returns and a lower business value.
  • Interest payments on debt are tax-deductible. A company paying 6% interest effectively pays only 6% × (1 − 21%) = 4.74% after-tax on US federal taxes. This tax shield makes debt cheaper than equity in WACC, which is why capital structure decisions matter.
  • Use market values, not book values. Market values reflect what equity and debt investors currently expect in returns. Book values are historical and distort weights significantly for firms with high goodwill, buybacks, or appreciated assets. Most corporate finance textbooks require market weights.
  • Unlevered cost of capital (ρ) is WACC without the tax shield: (E/V)×Re + (D/V)×Rd. It represents the cost of capital if the firm were 100% equity-financed. Used in APV (Adjusted Present Value) models.
  • WACCs vary by industry. Tech companies: 8–12%. Utilities: 5–7%. Consumer staples: 6–9%. Higher WACC means less DCF value for the same free cash flows. A 1% increase in WACC on a perpetuity formula can reduce firm value by 10–20%.

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Sources & References (5) ▾
  1. The Cost of Capital, Corporation Finance and the Theory of Investment — Modigliani & Miller (1958) — American Economic Review
  2. Damodaran — Cost of Capital by Industry — NYU Stern
  3. Principles of Corporate Finance — Brealey, Myers & Allen — McGraw-Hill
  4. WACC Explained — Investopedia — Investopedia
  5. CFA Institute — Cost of Capital — CFA Institute