WACC Calculator

Estimate weighted average cost of capital from market-value debt and equity weights, tax rate, debt cost, and CAPM or direct cost-of-equity inputs.

Blend equity and debt into one hurdle rate Use CAPM inputs or a direct required-return estimate for equity, then combine that with debt cost, tax rate, and capital structure weights to estimate after-tax WACC.

Cost of equity method

Display currency

Switch the formatting used for capital-structure values without changing the WACC percentage outputs.

Assumptions

WACC is only as good as the capital structure, debt cost, tax rate, and cost-of-equity assumptions behind it. CAPM-based equity cost still depends on judgment around beta and the market risk premium.

Result

8.9%

Estimated after-tax weighted average cost of capital for a capital base of $100,000,000.00.

Cost of equity
10%
After-tax debt cost
4.5%
Equity weight
80%
Debt weight
20%

Pre-tax WACC

9.2%

Before the tax shield from interest deductibility is applied.

Tax shield contribution

0.3%

Reduction from pre-tax WACC to after-tax WACC caused by the debt tax shield.

Capital structure details

Equity contributes 8% of the hurdle rate and debt contributes 0.9% after tax. Debt to equity is 0.25x.

Cost of equity source

CAPM is active: 4% risk-free rate + 1.2 beta × 5% equity risk premium.

Hurdle guidance

Use the after-tax WACC as a project hurdle or DCF discount-rate starting point, then pressure-test it against the specific financing and business risks in your case.

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Discount Rate Basics

WACC calculator guide: blend debt and equity into one after-tax hurdle rate

A weighted average cost of capital calculator estimates the blended hurdle rate implied by a company’s market-value debt and equity mix. It is commonly used as a starting point for project screening and discounted cash flow work, but it is only as reliable as the capital-structure, debt-cost, tax-rate, and cost-of-equity assumptions behind it.

What WACC is trying to capture

WACC combines the return required by equity investors and the effective after-tax cost of debt into one blended rate. That rate is often used as the minimum return a project or business needs to clear before value is being created for the providers of capital.

The blend matters because equity and debt usually do not cost the same. Equity investors take residual risk and typically require a higher return, while debt providers accept lower upside but may benefit from contractual protection and tax-deductible interest.

Core WACC maths

The standard structure is a weighted average: equity weight multiplied by cost of equity, plus debt weight multiplied by after-tax cost of debt. Market values are normally preferred for the weights because they better reflect what capital currently costs than old book balances do.

This calculator supports two equity-cost paths. CAPM mode estimates cost of equity from the risk-free rate, beta, and market risk premium. Direct-override mode lets you enter a required equity return directly when you already have a justified estimate.

WACC = (E / V) x Re + (D / V) x Rd x (1 - tax rate)

Standard weighted average cost of capital with after-tax debt cost.

Cost of equity (CAPM) = Risk-free rate + Beta x Equity risk premium

The CAPM route used when you want the calculator to estimate the equity return from market inputs.

Worked example: 80% equity and 20% debt

Suppose a company is financed with 80 million of equity market value and 20 million of debt market value. If cost of equity is 10%, pre-tax cost of debt is 6%, and the tax rate is 25%, the debt slice contributes less after tax because interest expense creates a tax shield.

The result is an after-tax WACC below the straight pre-tax blend. That does not make debt free. It means the blended hurdle is shaped by both the capital mix and the fact that the tax shield reduces the effective cost of debt for many businesses.

Why WACC is not one universal company number

A business can have different appropriate discount rates for different projects. A stable utility expansion and a speculative new product launch do not necessarily deserve the same hurdle rate just because they sit inside one corporate structure.

WACC is therefore best treated as a starting point rather than a final answer. If a project carries meaningfully different risk, financing, country exposure, or cyclicality than the firm as a whole, the discount rate should usually be adjusted rather than copied mechanically.

Further reading

Frequently asked questions

Why should WACC weights use market values instead of book values?

Because WACC is meant to reflect the current opportunity cost of capital. Market values are usually a better proxy for what investors and lenders currently require than historical accounting balances.

 Why is after-tax WACC lower than pre-tax WACC when debt is present?

Because interest expense often creates a tax shield. That reduces the effective cost of debt after tax and lowers the blended hurdle rate relative to the straight pre-tax mix.

 Should every project use the same WACC?

Not automatically. WACC is often a starting point for the business as a whole, but projects with materially different risk or financing may need a different discount rate.

 What if I already know the required return on equity?

Use the direct override mode. CAPM is useful when you want the tool to estimate cost of equity from market inputs, but it is reasonable to override it when you already have a justified required-return estimate.

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