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Cost of Capital (WACC) Calculator

Compute a company's weighted average cost of capital (WACC) to evaluate hurdle rates.

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Calculation Parameters

Specify your inputs below.

Calculated Result

Total Capital Value $200,000.00
Cost of Debt (After-Tax) 4.13%
WACC Hurdle Rate 8.16%
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Expert Tip

WACC is the average rate a business pays to finance its assets, used widely as a discount rate for cash flow forecasts.

How this Calculator Works

This calculator computes the Weighted Average Cost of Capital (WACC), which represents the average interest rate a firm pays to finance its assets. It weights the cost of debt and cost of equity proportionally based on the company's capital structure. Corporate finance managers use it as a hurdle rate for capital budgeting.

Formula & Methodology

WACC = (E / V * Re) + (D / V * Rd * (1 - T)) - E is the market value of equity. - D is the market value of debt. - V is the total capital value (E + D). - Re is the required cost of equity. - Rd is the cost of debt (interest rate). - T is the corporate tax rate.

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

A company has $6,000,000 in equity and $4,000,000 in debt (total capital V = $10,000,000). The cost of equity is 12%, the cost of debt is 6%, and the tax rate is 25%. 1. Calculate equity weight and cost: ($6M / $10M) * 12% = 7.2%. 2. Calculate post-tax debt weight and cost: ($4M / $10M) * 6% * (1 - 0.25) = 1.8%. 3. Sum the components: 7.2% + 1.8% = 9.0%. Result: The Weighted Average Cost of Capital (WACC) is 9.0%.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This equity research and valuation calculator evaluates corporate fundamentals, stock price multiples, cost of capital, dividend discount models, and shareholder return metrics based on SEC financial reporting and Wall Street equity analysis standards.

Variable Glossary

Input

Equity Inputs

Share price, earnings per share (EPS), dividend amount, book value, debt/equity ratio, or systematic beta coefficient.

Parameter

Valuation Output

Price-to-Earnings (P/E), EV/EBITDA multiple, Intrinsic Value ($), WACC %, or Return on Equity (ROE %).

How to Calculate Step-by-Step

1

Step 1

Input current stock price, shares outstanding, or balance sheet / income statement numbers.

2

Step 2

Enter expected growth rate, cost of equity, or market risk premium assumptions.

3

Step 3

Review calculated valuation multiples, margin of safety comparison, or required rate of return.

FAQ

What is WACC and why is it crucial for equity valuation?
Weighted Average Cost of Capital (WACC) represents a company's required average return on debt and equity capital. It is used as the hurdle rate to discount future cash flows in DCF valuation models.
How does stock Beta measure systematic risk?
A stock beta of 1.0 means price volatility matches the broader market index. Beta > 1.0 indicates higher volatility, while Beta < 1.0 reflects lower systematic volatility.
Should valuation multiples be evaluated in isolation?
No. Valuation ratios (P/E, EV/EBITDA, P/B) should always be benchmarked against industry peer groups, historical trading averages, and expected earnings growth (PEG ratio).