Weighted Average Cost of Capital (WACC) Calculator

Calculate the overall cost of capital that a company incurs for both debt and equity financing.

What is WACC?

Weighted Average Cost of Capital (WACC) is a financial metric that calculates a company’s overall cost of capital, combining both debt and equity financing. It's commonly used by analysts and investors to assess the valuation and financial health of companies.

WACC Formula

The formula to calculate WACC is:

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

Where:

  • E = Market value of equity
  • Re = Cost of equity
  • D = Market value of debt
  • Rd = Cost of debt
  • Tc = Corporate tax rate
  • V = Total market value of equity and debt (E + D)

Example of WACC Calculation

Let’s assume the following values for a company:

  • Market Value of Equity (E) = $1,000,000
  • Cost of Equity (Re) = 8%
  • Market Value of Debt (D) = $500,000
  • Cost of Debt (Rd) = 5%
  • Corporate Tax Rate (Tc) = 21%

Using the WACC formula, we can calculate the WACC as:

WACC = (1,000,000 / 1,500,000 * 8%) + ((500,000 / 1,500,000 * 5%) * (1 - 0.21)) = 6.09%