WACC Calculator
WACC blends what a company pays for equity and for debt, weighted by how much of each funds the business — with debt discounted for its tax deductibility. It’s the hurdle rate a project must beat to create value.
WACC = (E/V)×Re + (D/V)×Rd×(1−t). A firm that’s 70% equity costing 9% and 30% debt costing 6% with a 21% tax rate has a WACC of 7.72%.
- FormulaE/V·Re + D/V·Rd·(1−t)
- Example (70/30, 9%/6%, 21%)7.72%
- Why (1−t)Interest is tax-deductible
- Used forDCF discount rate, hurdle rates
Standard corporate-finance definition; the calculator applies it live.
Worked example
E = $700k, D = $300k → V = $1M. Equity leg: 0.70 × 9% = 6.30%. Debt leg: 0.30 × 6% × (1 − 0.21) = 1.42%. WACC = 7.72%. A project returning 9% clears the hurdle; one returning 7% destroys value even though it “makes money.”
Where each input comes from
Re usually comes from CAPM (risk-free rate + beta × equity risk premium) — typically 8–12% for public companies. Rd is the yield on the firm’s actual debt, not the coupon it printed years ago. Weights should use market values, and the tax rate should be the marginal rate the interest deduction actually saves. Garbage inputs here are the leading cause of confident, wrong DCF valuations.
Frequently asked questions
What is WACC in simple terms?
The average rate a company pays to fund itself, mixing the cost of shareholders' money and lenders' money in proportion to their use. Projects must out-earn it to be worth doing.
Why is the cost of debt multiplied by (1 − tax rate)?
Interest payments are tax-deductible, so a 6% coupon costs only 4.74% after a 21% tax saving. Equity gets no such shield — dividends aren't deductible.
What's a normal WACC?
Most established US companies land between 6% and 12% — lower for stable utilities, higher for volatile growth firms. Below the risk-free rate is a red flag in your inputs.
Should I use book or market values for the weights?
Market values. Book equity in particular can be wildly stale; WACC describes today's funding costs at today's proportions.
Sources & methodology
Sources: NumberBench methodology.
Results update as you type and are general estimates, not financial advice.