Use this WACC calculator to estimate the weighted average cost of capital from equity and debt inputs. Includes optional CAPM-based equity cost estimation and target-weight variants for planning scenarios.
Use template ->What is WACC?
WACC, or weighted average cost of capital, is the blended after-tax rate that a firm is expected to pay to finance its assets, weighted by how much of that financing comes from equity versus debt. It represents what capital costs across the full stack and is used as the minimum return threshold for investment decisions.
Projects expected to return above WACC add value under the current capital structure. Those expected to return below it do not. That is why WACC is so central to capital budgeting: it is the rate against which prospective investments are benchmarked.
WACC formula
WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc)
Where E is the market value of equity, D is the market value of debt, V is E + D, Re is the cost of equity, Rd is the cost of debt, and Tc is the corporate tax rate. The (1 − Tc) term reflects the tax shield on debt interest, which is why after-tax debt cost is lower than the pre-tax rate.
How the WACC calculator works
The calculator takes equity and debt weights alongside their respective costs and returns the blended after-tax rate. Optional CAPM-based equity cost estimation is available for situations where Re needs to be derived rather than assumed directly. Target-weight variants let the model reflect a planned capital structure rather than the current one, which is relevant in many planning and valuation scenarios.
The component breakdown makes the key inputs auditable. Weighting assumptions and how equity cost is constructed are the primary sensitivity drivers, and keeping them visible rather than embedded makes it easier to run scenarios and understand where the output is most assumption-dependent.
How WACC is used in corporate finance
WACC is the standard discount rate in discounted cash flow analysis and the benchmark return hurdle in capital budgeting. In M&A, it appears in valuation as the rate used to discount projected free cash flows. In strategic planning, it sets the threshold for evaluating whether new projects or acquisitions are expected to create or destroy value. Because its inputs (particularly the cost of equity) involve judgment, WACC estimates should be treated as a range rather than a single precise figure.