WACC Calculator

WACC (Weighted Average Cost of Capital) combines the cost of equity and the after-tax cost of debt, weighted by their share of the company's capital structure. It represents the minimum return the company must earn to keep its investors satisfied.

A lower WACC means cheaper financing. A higher WACC means the company needs to earn more to justify its cost of capital. Most established companies have a WACC between 6% and 12%.

WACC = (E/V × Re) + (D/V × Rd × (1 - Tc))

• E = equity value (what investors own)
• D = debt value (what the company borrowed)
• V = E + D (total financing)
• Re = cost of equity (the return investors expect)
• Rd = cost of debt (interest rate on borrowing)
• Tc = tax rate (debt interest is tax-deductible, which makes borrowing cheaper)