WACC is the blended cost of financing a company's assets through equity and debt. It represents the minimum return a company must earn on its existing asset base to satisfy its creditors, owners, and other capital providers.

Why is the tax rate used in WACC?

Interest payments on debt are tax-deductible, which reduces the effective cost of debt. The formula uses (1 - Tax Rate) to reflect this tax shield benefit, making debt financing cheaper after tax.

How do I estimate Cost of Equity?

Cost of equity is typically estimated using CAPM: Re = Rf + β × (Rm - Rf), where Rf is the risk-free rate, β is beta (market sensitivity), and Rm is the expected market return. Typical range: 8-15%.

Lower WACC is better — it means cheaper cost of capital. Typical WACCs range from 6-12% for established companies. Startups may have higher WACCs (15-25%) due to risk. Compare WACC against project IRR; projects should earn above WACC.

How does capital structure affect WACC?

Adding more debt typically lowers WACC up to a point because debt is cheaper than equity (due to tax shield). But too much debt increases financial risk, raising both cost of equity and cost of debt. The optimal mix minimizes overall WACC.

WACC Calculator

Calculate the Weighted Average Cost of Capital for your company.

Capital Structure

Market Value of Equity

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Total market capitalization or equity value.

Market Value of Debt

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Total outstanding debt at market value.

Rates

Cost of Equity (Re)

Expected return on equity (CAPM).

Cost of Debt (Rd)

Interest rate on debt before tax.

Tax Rate (Tc)

Corporate tax rate for tax shield.

Weighted Average Cost of Capital

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WACC

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After-Tax Cost of Debt

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Total Capital (V)

Capital Mix

Equity

Debt

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Equity (E/V)

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Debt (D/V)

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Equity Contributes

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Debt Contributes

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Documentation

How It Works

WACC blends the cost of equity and after-tax cost of debt, weighted by their proportions in the capital structure. It's commonly used as the discount rate in DCF analysis.

Formula

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Frequently Asked Questions

How to Use

About the WACC Calculator

What it calculates

This wacc calculator models key business metrics for startups and small companies. Calculate Weighted Average Cost of Capital for your company.

When to use it

Use when forecasting runway, pricing, margins, or growth to support business planning.

Example

Adjust the inputs above to model your specific scenario with the WACC Calculator.

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WACC Calculator

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How It Works

Formula

About the WACC Calculator

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