{"id":137,"date":"2015-05-29T09:38:05","date_gmt":"2015-05-29T07:38:05","guid":{"rendered":"http:\/\/wpcalc.com\/?p=137"},"modified":"2026-09-30T20:11:41","modified_gmt":"2026-09-30T17:11:41","slug":"weighted-average-cost-of-capital","status":"publish","type":"post","link":"https:\/\/wpcalc.com\/en\/finance\/weighted-average-cost-of-capital\/","title":{"rendered":"Weighted Average Cost of Capital Calculator"},"content":{"rendered":"<section class=\"not-prose calculator-box\" aria-labelledby=\"calculator-title\"><div class=\"flex items-baseline sm:items-center justify-between gap-2 sm:gap-3\"><div class=\"flex flex-col sm:flex-row sm:items-center gap-2\"><span class=\"icon icon-calculator text-primary-700! text-base! dark:text-primary-300!\" aria-hidden=\"true\"><\/span><h2 id=\"calculator-title\" class=\"text-lg font-display font-bold\">WACC \u2013 Capital Cost Estimator<\/h2><\/div><div class=\"calcdash-favorite group\">\n  <button type=\"button\" class=\"favorite\" id=\"favorite\" data-favorite-id=\"137\" data-favorite-title=\"Weighted Average Cost of Capital\" data-favorite-url=\"https:\/\/wpcalc.com\/en\/finance\/weighted-average-cost-of-capital\/\" data-favorite-excerpt=\"Calculate the Weighted Average Cost of Capital (WACC) from equity value, debt value, cost of equity, cost of debt and the corporate tax rate. Enter the five inputs to get your company&#039;s blended financing cost in percent.\" aria-label=\"Add to Favorites\" data-favorite-icon=\"icon icon-inventory\">\n    <span class=\"icon icon-shape-star-empty\" aria-hidden=\"true\"><\/span>\n  <\/button>\n  <div class=\"calcdash-favorite__tip\" aria-hidden=\"true\">\n   <span class=\"favorite-tooltip\" id=\"favorite-tooltip\"><\/span>\n  <\/div>\n  <span class=\"sr-only\" role=\"status\" id=\"favorite-status\"><\/span>\n<\/div><\/div><form action=\"https:\/\/wpcalc.com\/en\/finance\/weighted-average-cost-of-capital\/\" method=\"POST\" class=\"calculator\" id=\"calculator-137\" data-post=\"137\"><fieldset class=\"fieldset-input\"><legend class=\"sr-only\">Input Fields<\/legend><div class=\"field has-term\" id=\"input-1\"><label for=\"field-1\">Equity value (E)<\/label><div class=\"term\">E<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"equity_value_e\" id=\"field-1\" aria-describedby=\"calc-unit-1 calc-info-1\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"800000\"\/><div class=\"unit\" id=\"calc-unit-1\">$<\/div><small id=\"calc-info-1\">Market value of equity (e.g. market cap)<\/small><\/div><div class=\"field has-term\" id=\"input-2\"><label for=\"field-2\">Debt value (D)<\/label><div class=\"term\">D<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"debt_value_d\" id=\"field-2\" aria-describedby=\"calc-unit-2 calc-info-2\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"200000\"\/><div class=\"unit\" id=\"calc-unit-2\">$<\/div><small id=\"calc-info-2\">Market value of total debt<\/small><\/div><div class=\"field has-term\" id=\"input-3\"><label for=\"field-3\">Cost of equity (Re)<\/label><div class=\"term\">Re<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"cost_of_equity_re\" id=\"field-3\" aria-describedby=\"calc-unit-3 calc-info-3\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"10\"\/><div class=\"unit\" id=\"calc-unit-3\">%<\/div><small id=\"calc-info-3\">Required return on equity capital<\/small><\/div><div class=\"field has-term\" id=\"input-4\"><label for=\"field-4\">Cost of debt (Rd)<\/label><div class=\"term\">Rd<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"cost_of_debt_rd\" id=\"field-4\" aria-describedby=\"calc-unit-4 calc-info-4\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"5\"\/><div class=\"unit\" id=\"calc-unit-4\">%<\/div><small id=\"calc-info-4\">Effective interest rate on debt<\/small><\/div><div class=\"field has-term\" id=\"input-5\"><label for=\"field-5\">Tax rate (T)<\/label><div class=\"term\">T<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"tax_rate_t\" id=\"field-5\" aria-describedby=\"calc-unit-5 calc-info-5\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" max=\"100\" value=\"30\"\/><div class=\"unit\" id=\"calc-unit-5\">%<\/div><small id=\"calc-info-5\">Corporate tax rate<\/small><\/div><\/fieldset><div class=\"buttons\"><button type=\"submit\" data-text=\"Re-Calculate\" id=\"calculate-button\" data-post=\"137\">Calculate<\/button><button type=\"reset\">Reset<\/button><\/div><div class=\"field is-checkbox hidden!\" id=\"field-auto-calc\"><input type=\"checkbox\" id=\"auto-calc\"><label for=\"auto-calc\">Calculate automatically<\/label><small>If enabled, the result will update automatically when you change any value.<\/small><\/div><div class=\"fieldset-result is-hidden\" aria-labelledby=\"result-title\" aria-live=\"polite\" role=\"region\"> <h3 class=\"result-title bg-gradient-to-r from-primary-50 to-gray-50 dark:from-primary-900 dark:to-gray-800\" id=\"result-title\"><span class=\"icon icon-s-pulse\" aria-hidden=\"true\"><\/span> Your Results<\/h3><div class=\"result-box\"><div class=\"field-result\" id=\"output-1\"><span class=\"field-title\"><span>WACC<\/span><\/span><span class=\"field-value\" id=\"result-1\" data-unit=\"%\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result is-column\" id=\"output-2\"><span class=\"field-title\"><span>Interpretation<\/span><\/span><span class=\"field-value\" id=\"result-2\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><\/div><div class=\"result-actions\"><button type=\"button\" class=\"copy-link\"><svg viewBox=\"0 0 20 20\" fill=\"currentColor\" aria-hidden=\"true\"><path d=\"M12.232 4.232a2.5 2.5 0 0 1 3.536 3.536l-1.225 1.224a.75.75 0 0 0 1.061 1.06l1.224-1.224a4 4 0 0 0-5.656-5.656l-3 3a4 4 0 0 0 .225 5.865.75.75 0 0 0 .977-1.138 2.5 2.5 0 0 1-.142-3.667l3-3Z\"\/><path d=\"M11.603 7.963a.75.75 0 0 0-.977 1.138 2.5 2.5 0 0 1 .142 3.667l-3 3a2.5 2.5 0 0 1-3.536-3.536l1.225-1.224a.75.75 0 0 0-1.061-1.06l-1.224 1.224a4 4 0 1 0 5.656 5.656l3-3a4 4 0 0 0-.225-5.865Z\"\/><\/svg><span class=\"copy-link__text\">Copy link to this calculation<\/span><\/button><span class=\"sr-only\" role=\"status\" id=\"copy-link-status\"><\/span><\/div><\/div><a href=\"#respond\" class=\"hidden transition-opacity duration-300 opacity-0 w-50 text-sm justify-center items-center gap-2 px-4 py-2 rounded bg-gray-200 text-gray-700 hover:bg-gray-300\" id=\"leave-comment\"><span class=\"icon icon-comments\" aria-hidden=\"true\"><\/span>Leave a Comment<\/a><\/form><\/section><section id=\"calc-reactions\" class=\"not-prose hidden my-12 bg-gradient-to-r from-primary-50 to-gray-50 border border-indigo-100 rounded-xl px-6 py-4 shadow-sm\" data-post=\"137\" aria-live=\"polite\" aria-labelledby=\"calc-reactions-title\"><p id=\"calc-reactions-title\" class=\"text-sm text-gray-500 text-center mb-2\">How did this result make you feel?<\/p><div role=\"group\" aria-labelledby=\"calc-reactions-title\" class=\"grid grid-cols-3 sm:flex sm:flex-row sm:justify-around gap-4 sm:items-center sm:flex-wrap\"><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"like\"><span class=\"reaction-count\" data-reaction-count=\"like\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude00 <\/span><span class=\"reaction-description font-medium\">Like <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"helpful\"><span class=\"reaction-count\" data-reaction-count=\"helpful\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\udca1 <\/span><span class=\"reaction-description font-medium\">Helpful <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"confused\"><span class=\"reaction-count\" data-reaction-count=\"confused\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude15 <\/span><span class=\"reaction-description font-medium\">Confused <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"disappointed\"><span class=\"reaction-count\" data-reaction-count=\"disappointed\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude1e <\/span><span class=\"reaction-description font-medium\">Disappointed <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"inaccurate\"><span class=\"reaction-count\" data-reaction-count=\"inaccurate\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\u274c <\/span><span class=\"reaction-description font-medium\">Inaccurate <\/span><\/button><\/div><div id=\"reaction-message\" class=\"hidden mt-8 rounded-md border border-primary-100 bg-white\/50 backdrop-blur-sm px-4 py-2 text-sm text-center shadow-sm\"><\/div><\/section><div class=\"calcdash-ad not-prose calcdash-ad--calc_result calcdash-ad--in-article\"><ins class=\"adsbygoogle\" style=\"display:block\" data-ad-client=\"ca-pub-1721569815777345\" data-ad-slot=\"6317458308\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\"><\/ins><script>(adsbygoogle = window.adsbygoogle || []).push({});<\/script><\/div>\n<style id=\"wpcoderpro-inline-1\">.formula-box {\r\n\tborder-bottom: none !important;\r\n}<\/style><section class=\"formula-box\" aria-labelledby=\"formula-title\">\r\n\t<div id=\"formula-title\" class=\"not-prose font-display mb-4\"><span class=\"icon icon-formula\" aria-hidden=\"true\"><\/span><h2>Weighted Average Cost of Capital Formula<\/h2><\/div>\r\n\t<figure class=\"not-prose formula\">\r\n\t\t<figcaption class=\"formula-title\">Formula<\/figcaption>\r\n\t\t<div class=\"text-base text-gray-800\" id=\"formula\">\n\\[ \\text{WACC} = \\left( \\frac{E}{V} \\times R_e \\right) + \\left( \\frac{D}{V} \\times R_d \\times (1 - T) \\right) \\]\n<\/div>\r\n\t<\/figure>\r\n\t<\/p>\n<p><strong>Where:<\/strong><\/p>\n<ul>\n<li>\\(E\\) \u2014 market value of equity (e.g. market capitalization)<\/li>\n<li>\\(D\\) \u2014 market value of total debt<\/li>\n<li>\\(V\\) \u2014 total capital, \\(V = E + D\\)<\/li>\n<li>\\(R_e\\) \u2014 cost of equity (required return of shareholders)<\/li>\n<li>\\(R_d\\) \u2014 cost of debt (effective interest rate)<\/li>\n<li>\\(T\\) \u2014 corporate tax rate<\/li>\n<\/ul>\n<p>The formula takes the share of the capital structure financed by each source, multiplies it by that source's cost, and adds the two parts together. The debt term is multiplied by \\((1 - T)\\) because interest payments are tax-deductible, which lowers the effective cost of borrowing.<\/p>\n<p>\r\n<\/section>\n<style id=\"wpcoderpro-inline-459\">.calculation-box {\r\n\tborder-bottom: none !important;\r\n}<\/style><section id=\"calculation\" class=\"calculation-box\" aria-labelledby=\"calculation-title\">\r\n\t<div id=\"calculation-title\" class=\"not-prose font-display\"><span class=\"icon icon-unordered-list\" aria-hidden=\"true\"><\/span><h2>Weighted Average Cost of Capital \u2013 Calculation Example<\/h2><\/div>\r\n\r\n<\/p>\n<p><strong>Example:<\/strong> a company has $800,000 in equity and $200,000 in debt, a 10% cost of equity, a 5% cost of debt, and pays a 30% corporate tax rate. Total capital is \\(V = 800{,}000 + 200{,}000 = 1{,}000{,}000\\).<\/p>\n<p>\\[ \\text{WACC} = \\left( \\frac{800{,}000}{1{,}000{,}000} \\times 0.10 \\right) + \\left( \\frac{200{,}000}{1{,}000{,}000} \\times 0.05 \\times (1 - 0.30) \\right) \\]<\/p>\n<p>\\[ \\text{WACC} = 0.080 + 0.007 = 0.087 = 8.7\\% \\]<\/p>\n<p><strong>Result:<\/strong> WACC = 8.7%. The company must earn at least 8.7% on new investments to satisfy both its shareholders and its lenders.<\/p>\n<p>\n\r\n<\/section>\n<h2>How to Use the Calculator<\/h2>\n<ol>\n<li>Enter the <strong>Equity value (E)<\/strong> \u2014 the market value of the company's equity, such as its market capitalization.<\/li>\n<li>Enter the <strong>Debt value (D)<\/strong> \u2014 the market value of all outstanding debt (loans, bonds, credit lines).<\/li>\n<li>Enter the <strong>Cost of equity (Re)<\/strong> as a percentage \u2014 the return shareholders expect, often estimated with the CAPM.<\/li>\n<li>Enter the <strong>Cost of debt (Rd)<\/strong> as a percentage \u2014 the effective interest rate the company pays on its borrowings.<\/li>\n<li>Enter the <strong>Tax rate (T)<\/strong> as a percentage \u2014 the corporate income tax rate applied to the company's profits.<\/li>\n<li>Read the resulting <strong>WACC<\/strong> in percent, along with a short interpretation of whether the value is low, average, or high.<\/li>\n<\/ol>\n<h2>What Is WACC and Why It Matters<\/h2>\n<p>The Weighted Average Cost of Capital is the blended, after-tax rate a company pays to finance its operations from all sources of capital. Because most firms are funded by a mix of equity and debt, no single interest rate describes their financing cost. WACC solves this by weighting each source's cost by its share of the total capital structure.<\/p>\n<p>WACC is one of the most widely used figures in corporate finance. It serves as the discount rate in Discounted Cash Flow (DCF) valuation models, where future cash flows are divided by \\((1 + \\text{WACC})^n\\) to estimate the present value of a business. It is also the standard <em>hurdle rate<\/em> for capital budgeting: a project should only be accepted if its expected return exceeds the WACC.<\/p>\n<p>The interpretation of the result is straightforward. A WACC of 8.7% means that every dollar invested in the company must generate at least 8.7 cents of return per year, on average, to cover the demands of investors and creditors. A lower WACC generally means cheaper capital, higher valuations, and more investment opportunities clearing the hurdle; a higher WACC makes growth more expensive and reduces the present value of future earnings.<\/p>\n<p>Because equity holders take more risk than lenders, the cost of equity is nearly always higher than the cost of debt \u2014 which is why some debt in the capital structure can actually lower WACC, up to a point. Excess debt, however, raises financial risk and eventually pushes both \\(R_e\\) and \\(R_d\\) higher. To judge whether the capital is being used well, compare WACC against profitability metrics such as <a href=\"https:\/\/wpcalc.com\/en\/finance\/return-on-capital-employed\/\">Return on Capital Employed<\/a> and <a href=\"https:\/\/wpcalc.com\/en\/finance\/return-on-equity\/\">Return on Equity<\/a>.<\/p>\n<h2>Assumptions and Limitations<\/h2>\n<ul>\n<li><strong>Market values, not book values.<\/strong> The formula assumes E and D are current market values. Book values from the balance sheet can distort the weights, especially for older companies.<\/li>\n<li><strong>Constant capital structure.<\/strong> WACC assumes the target debt-to-equity ratio stays the same over the valuation period. Large financing changes make the result less reliable.<\/li>\n<li><strong>Cost of equity is an estimate.<\/strong> \\(R_e\\) is not observed directly. It is usually derived from the CAPM (risk-free rate plus beta times the market risk premium), and small changes in inputs shift WACC noticeably.<\/li>\n<li><strong>Tax shield only applies to profitable firms.<\/strong> The \\((1 - T)\\) adjustment assumes the company actually pays taxes and can deduct interest. A loss-making firm gets no immediate benefit from the tax shield.<\/li>\n<li><strong>Rounding of rates.<\/strong> Enter Re, Rd, and T in percent (e.g. 10 for 10%, not 0.10) \u2014 the calculator handles the conversion internally.<\/li>\n<\/ul>\n<p>When evaluating a specific investment, also check that the project's risk matches the company's overall risk: WACC is only a valid hurdle rate for projects similar to the existing business. For related analysis, see the <a href=\"https:\/\/wpcalc.com\/en\/finance\/solvency-ratio\/\">Solvency Ratio<\/a> to assess debt sustainability, and the <a href=\"https:\/\/wpcalc.com\/en\/finance\/break-even\/\">Break Even<\/a> calculator to find the sales level a project must reach.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Calculate the Weighted Average Cost of Capital (WACC) from equity value, debt value, cost of equity, cost of debt and the corporate tax rate. Enter the five inputs to get your company's blended financing cost in percent.<\/p>\n","protected":false},"author":70,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[26],"class_list":["post-137","post","type-post","status-publish","format-standard","hentry","category-finance","tag-inventory"],"acf":[],"_links":{"self":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/137","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/users\/70"}],"replies":[{"embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/comments?post=137"}],"version-history":[{"count":3,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/137\/revisions"}],"predecessor-version":[{"id":66190,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/137\/revisions\/66190"}],"wp:attachment":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/media?parent=137"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/categories?post=137"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/tags?post=137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}