Free Tools WACC Calculator

A WACC Calculator is a tool that calculates a company’s Weighted Average Cost of Capital (WACC) — the average rate of return a company must provide to satisfy its investors and lenders.

WACC is commonly used in corporate finance, investment analysis, and business valuation to determine the cost of funding a company’s operations.

WACC Formula

$$\text{WACC} = \left(\frac{E}{V} \times R_e\right) + \left(\frac{D}{V} \times R_d \times (1-T_c)\right)$$WACC=(VE​×Re​)+(VD​×Rd​×(1−Tc​))

Where:

• E = Market value of equity (company value from shareholders)
• D = Market value of debt (loans and bonds)
• V = Total capital (E + D)
• Rₑ = Cost of equity (required return by shareholders)
• Rᵈ = Cost of debt (interest rate on borrowing)
• Tᶜ = Corporate tax rate

Example

A company has:

• Equity value: $700 million
• Debt value: $300 million
• Cost of equity: 10%
• Cost of debt: 5%
• Corporate tax rate: 25%

Calculation:$$WACC = (0.7 \times 10\%) + (0.3 \times 5\% \times (1-0.25))$$WACC=(0.7×10%)+(0.3×5%×(1−0.25))$$WACC = 7\% + 1.125\%$$WACC=7%+1.125%$$\text{WACC} = 8.125\%$$WACC=8.125%

The company’s WACC is approximately 8.13%.

What a WACC Calculator Requires

Typical inputs include:

• Market capitalization (equity value)
• Total debt
• Cost of equity
• Interest rate on debt
• Tax rate

Some calculators also help estimate:

• Risk-free rate
• Equity risk premium
• Beta (stock volatility measure)

Why WACC Is Important

Companies and investors use WACC to:

• Value businesses using discounted cash flow (DCF) analysis.
• Decide whether an investment project is worthwhile.
• Compare investment returns against the company’s funding cost.
• Measure financial risk.

How to Interpret WACC

• Lower WACC: The company can raise money more cheaply and may have lower financing risk.
• Higher WACC: Investors demand higher returns, often indicating higher business risk.

Example in Investment Decisions

If a company’s project is expected to return:

• Project return: 12%
• WACC: 8%

The project may create value because it earns more than the company’s cost of capital.

If the project return is:

• Project return: 6%
• WACC: 8%

It may destroy shareholder value.

A WACC Calculator is therefore a quick way to estimate the minimum return a company needs to generate to justify its financing costs.