• 6 min read
WACC Calculator: Find Your Cost of Capital
WACC tells you the minimum return a company must earn to cover its financing costs. Every dollar raised comes with a price tag. WACC combines those costs into one percentage.
Use our wacc calculator to calculate WACC online for any company. Search a stock to auto-fill market data, adjust assumptions, and see how capital structure shifts the result.
The WACC Formula
Weight the cost of equity by how much equity the company uses, weight the after-tax cost of debt by how much debt it uses, and add them together.
| Variable | Meaning |
|---|---|
| E | Market value of equity (what investors own) |
| D | Market value of debt (what the company borrowed) |
| V | E + D (total financing) |
| Re | Cost of equity (the return investors expect) |
| Rd | Cost of debt (the interest rate on borrowing) |
| Tc | Corporate tax rate |
Why does debt get a tax adjustment? Interest payments are tax-deductible. A company borrowing at 5% with a 21% tax rate pays an effective rate of 3.95%. That tax shield makes debt cheaper than it looks on paper.
Example: A company with $800M equity and $200M debt uses 80/20 financing. Cost of equity 10%, cost of debt 5%, tax rate 21%. WACC = (0.80 x 10%) + (0.20 x 5% x 0.79) = 8.79%.
Two Ways to Start
The calculator has two modes: By Stock and Custom.
By Stock is the fastest path. Search for a company and the calculator auto-fills market cap, total debt, and beta. You control the assumptions (risk-free rate, market risk premium, cost of debt, tax rate) and can adjust them after the data loads. Cost of equity is derived through CAPM.
Custom mode is for private companies or hypothetical scenarios. Enter equity value, debt value, cost of equity, cost of debt, and tax rate directly. Use this when you know cost of equity from your own analysis or industry benchmarks.
Both modes run the same formula. The difference is where the inputs come from.
Key Inputs
Market Cap and Total Debt
These two numbers define the capital structure. Market cap represents equity: share price multiplied by shares outstanding. Total debt represents borrowings.
Their ratio drives equity weight (E/V) and debt weight (D/V). A company with $900M equity and $100M debt is 90% equity-funded. Shift to $600M/$400M, and WACC moves toward cheaper debt.
Tip: In By Stock mode, these fields lock when you select a stock. Switch to Custom to test different capital structures.
Beta
Beta measures how much a stock moves relative to the market. A beta of 1.0 tracks the market. Above 1.0 means more volatile. Below 1.0, less.
The calculator uses beta in CAPM: Re = risk-free rate + beta x market risk premium. A stock with beta 1.5 and a 5.5% premium adds 8.25% of risk on top of the risk-free rate. Higher beta pushes WACC up.
Risk-Free Rate
The return an investor earns with zero risk: in practice, the 10-year government bond yield. Check the current yield and adjust the calculator to match.
A 1% increase in the risk-free rate adds roughly 1% to cost of equity, flowing directly into WACC.
Market Risk Premium
The extra return investors demand for holding stocks instead of risk-free bonds. Estimates range from 4% to 7% depending on source, time period, and methodology. The long-term US equity average sits around 5% to 6%. A 1% higher premium on a stock with beta 1.3 adds 1.3% to cost of equity.
Cost of Debt and Tax Rate
Cost of debt is the average interest rate on borrowings. Investment-grade companies typically pay 3% to 6%. High-yield borrowers can exceed 8%. Enter the rate that matches the company you are analyzing.
The tax rate should reflect the company's effective corporate tax rate. The formula multiplies cost of debt by (1 - tax rate) to reflect interest deductibility. Higher tax rates make debt cheaper after tax, lowering WACC.
Reading Your Results
The calculator displays three outputs.
WACC percentage is the main result. Most companies fall between 6% and 12%. Below 6% typically means stable, low-beta companies with cheap debt. Above 12% signals high risk or expensive financing. This is the discount rate you plug into a dcf calculator to value future cash flows.
Cost of equity shows what shareholders expect to earn. In By Stock mode, this comes from CAPM. In Custom mode, it is the value you entered directly. Cost of equity is almost always higher than cost of debt.
After-tax cost of debt shows borrowing cost after the tax shield, reduced by (1 - tax rate).
The pie chart visualizes capital structure. A 90% equity-funded company has a WACC dominated by cost of equity. A 50/50 split blends both costs more evenly.
WACC is a model, not a fact. It depends on assumptions that change over time. Adjust one input at a time to see what drives the result for a specific company.
Open the wacc calculator and search for any stock to see its cost of capital in seconds.
Frequently Asked Questions
What is a good WACC for a company?
There is no universal answer. Most stable companies have a WACC between 6% and 10%. Utilities tend lower because they use cheap debt. High-growth tech companies often land between 10% and 14% because they rely more on equity financing.
Why is WACC used as the discount rate in DCF?
WACC represents the minimum return needed to satisfy both debt holders and equity holders. Discounting future cash flows by WACC answers: "What are these cash flows worth today, given the cost of capital that produced them?" Higher WACC means future cash flows are worth less, which lowers valuation.
Does a lower WACC always mean a better investment?
Not necessarily. Lower WACC raises valuation in a DCF model, but that lower cost might come from heavy debt, which adds financial risk. A company with 5% WACC and high leverage is not safer than one at 10% funded by equity. WACC measures cost of capital, not business quality.
How does changing the tax rate affect WACC?
A higher tax rate makes debt cheaper because interest saves more in taxes. If the rate rises from 21% to 30%, after-tax cost of debt drops, pulling WACC down. Companies in high-tax jurisdictions sometimes carry more debt for this reason: the tax shield makes borrowing more attractive.