About

The Weighted Average Cost of Capital (WACC) is the compass by which companies navigate investment decisions. It represents the minimum return a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital. If a project's Return on Invested Capital (ROIC) does not exceed the WACC, it destroys value.

This advanced WACC Calculator allows for precise 'Cost of Capital' estimation. It is specifically designed for financial analysts and students who need to account for the Tax Shield benefit of debt. Unlike simpler tools, this calculator offers a built-in reference database for corporate tax rates across 10 major economies, streamlining the input process for international valuation models.

Formulas

The WACC formula weighs the cost of equity and the cost of debt proportionally. Crucially, it applies the tax shield (1 − T) to the cost of debt, as interest payments are typically tax-deductible.

WACC = (EV × Re) + (DV × Rd × (1 − T))

Where V = E + D (Total Value).

Reference Data

Component	Symbol	Typical Source of Data
Cost of Equity	Re	CAPM Model (Risk Free Rate + Beta * Risk Premium)
Cost of Debt	Rd	Yield to Maturity (YTM) on long-term bonds
Market Value of Equity	E	Share Price × Shares Outstanding
Market Value of Debt	D	Total long-term and short-term debt (Market value preferred)
Corporate Tax Rate	T	Effective marginal tax rate (Country specific)
Weight of Equity	W_e	E / (E + D)
Weight of Debt	W_d	D / (E + D)

Frequently Asked Questions

Ideally, you should always use Market Value. Book value is historical and does not reflect the current economic reality or the actual cost to raise new capital today. However, for private companies where market data is unavailable, book value or industry comparables are often used as a proxy.

Interest payments on debt are treated as a business expense and are tax-deductible in most jurisdictions, effectively lowering the 'real' cost of that debt. Dividends paid to equity holders are typically not tax-deductible, so the Cost of Equity is not adjusted for taxes.

A lower WACC indicates a cheaper cost of funding and generally supports higher valuations. Stable utility companies might have a WACC of 4-6%, while volatile tech startups could have a WACC exceeding 10-15%. The 'correct' WACC is relative to the risk profile of the industry.

The Cost of Equity is usually calculated using the Capital Asset Pricing Model (CAPM): Risk-Free Rate + (Beta × Market Risk Premium). It represents the return investors demand for holding the company's stock.