WACC Calculator
The weighted average cost of capital (WACC) is the blended rate a company pays to fund its assets, weighting the cost of equity and the after-tax cost of debt by their share of total capital. It is the workhorse discount rate for valuation and the hurdle rate for new projects. Enter the market values of equity and debt, the cost of equity, the cost of debt, and the corporate tax rate. The calculator returns the WACC, the equity and debt weights, and the after-tax cost of debt.
WACC formula
V = equity + debt
Equity weight = equity / V, Debt weight = debt / V
After-tax cost of debt = cost of debt * (1 - tax rate)
WACC = equity weight * cost of equity + debt weight * after-tax cost of debt
Equity and debt are market values; their sum V must be positive. Cost of equity, cost of debt, and tax rate are entered as percentages. The interest tax shield lowers the effective cost of debt by the tax rate.
Cost of capital context
- WACC is the standard discount rate for discounted cash flow valuation.
- A project should generally earn more than the WACC to add value.
- The interest tax shield makes debt cheaper than equity on an after-tax basis.
- Use market values for the weights where they are available.
- A lower WACC increases the present value of future cash flows.
WACC: frequently asked questions
What is the weighted average cost of capital?
The weighted average cost of capital (WACC) is the average rate a company expects to pay to finance its assets, weighting the cost of equity and the after-tax cost of debt by their share of total capital. It is the standard discount rate for valuing a firm's cash flows.
What is the WACC formula?
WACC = (E/V times cost of equity) plus (D/V times cost of debt times (1 minus tax rate)), where E is the market value of equity, D is the market value of debt, and V is E plus D. The tax adjustment reflects that interest on debt is tax deductible.
Why is the cost of debt adjusted for tax?
Interest payments are tax deductible, so each dollar of interest reduces taxable income and saves tax at the company's rate. The after-tax cost of debt is therefore the stated cost of debt multiplied by (1 minus the tax rate), which lowers the effective financing cost.
What values should I use for equity and debt?
Use market values where possible: market capitalization for equity and the market value of interest-bearing debt. If market values are unavailable, book values can be used as an approximation. The weights are each component divided by total capital.
How is WACC used?
WACC is the discount rate in discounted cash flow valuation and the hurdle rate for capital budgeting. A project should generally earn a return above the WACC to create value. A lower WACC raises the present value of future cash flows.
Official sources
- U.S. Securities and Exchange Commission: How to Read Financial Statements.
- U.S. Internal Revenue Service: Deducting Business Expenses (interest).
Reviewed by the CalculatorHub team, edited by James Graham, 16 June 2026. See our methodology.