WACC Calculator

Category: Finance Author: Henrick Yau

Calculate the Weighted Average Cost of Capital (WACC) for your company or investment. WACC represents the average rate that a company is expected to pay to finance its assets, including the cost of debt and equity.

Cost of Equity

%
E.g., 10-year government bond yield
Measure of volatility relative to the market
%
Expected market return or long-term average

Cost of Debt

%
Interest rate on new debt
%
Marginal tax rate for your company

Capital Structure

%
Percentage of financing from equity
%
Percentage of financing from debt

What Is the WACC Calculator?

The Weighted Average Cost of Capital (WACC) Calculator helps estimate the overall cost a company incurs to Finance its operations through a mix of debt and equity. This figure is a key input in Financial analysis, business valuation, and Investment decisions.

WACC Formula:
WACC = (E / V) ร— Re + (D / V) ร— Rd ร— (1 - Tc)
  • E: Market value of equity
  • D: Market value of debt
  • V: Total value (E + D)
  • Re: Cost of equity
  • Rd: Cost of debt
  • Tc: Corporate tax rate

How to Use the Calculator

This calculator is designed to provide a clear and quick way to estimate your companyโ€™s WACC. It guides you through entering essential details, such as your capital structure, cost of equity, and cost of debt.

Steps to Use:

  • Choose how you want to calculate the cost of equity: CAPM, Dividend Growth Model, or manual input.
  • Enter values for risk-free rate, beta, market return, dividend yield, or growth rate, depending on your method.
  • Input the pre-tax cost of debt and corporate tax rate.
  • Specify how much of your financing comes from equity and debt.
  • Click the "Calculate WACC" button to get your results.

The calculator instantly displays:

  • WACC: The blended cost of capital.
  • Cost of Equity: The return investors expect from equity.
  • After-Tax Cost of Debt: The effective interest cost after tax benefits.

Why WACC Matters

WACC is a key indicator of how much a company must earn to satisfy its investors. It also serves as a benchmark rate for investment decisions and is widely used in loan repayment analysis, financial forecasts, and debt reduction tools.

Applications Include:

  • Capital budgeting and investment evaluation
  • Business and asset valuation
  • Discounted cash flow (DCF) modeling
  • Setting hurdle rates for projects

This calculator also complements Other tools like a Loan Payment Calculator for evaluating monthly loan costs and repayment breakdowns, a Debt Repayment Calculator for managing debt strategies, and a Personal Loan Calculator for projecting personalized loan costs.

Frequently Asked Questions (FAQ)

What is a good WACC value?

A lower WACC usually indicates lower risk and cheaper financing. However, what's considered "good" depends on your industry and capital structure.

Can WACC be used for personal finance?

While WACC is a corporate finance metric, understanding it can improve decision-making around debt and equity, similar to using a personal loan estimate tool or loan cost estimator.

How is this different from a loan payment calculator?

A loan payment calculator focuses on specific loan repayment schedules, monthly costs, and interest breakdowns. The WACC Calculator focuses on the broader cost of financing a company, not individual loan details.

Can I adjust for tax impacts?

Yes, the calculator factors in your corporate tax rate to give an accurate after-tax cost of debt, which influences your WACC.

Does this calculator work for startups?

Yes. Whether you're managing a startup or an established business, calculating WACC helps you understand your financing costs and plan your capital strategy effectively.

How This Calculator Can Help You

  • Compare financing options more effectively
  • Support investment and project appraisal
  • Refine your loan repayment guide or debt payoff strategy
  • Serve as a foundation for business valuation and loan repayment estimates
  • Inform long-term financial planning and capital structure choices

Use the WACC Calculator alongside tools like a debt repayment tool, monthly loan estimator, or loan amortization details calculator for a well-rounded financial strategy.