WACC Calculator
Blend your cost of equity and after-tax cost of debt into the discount rate every DCF and investment decision hinges on. Free and private — nothing leaves your browser.
WACC Calculator
The hurdle rate for corporate finance.
How it works
WACC = (E% × Cost of Equity) + (D% × Cost of Debt × (1 − Tax Rate))Companies fund themselves with two kinds of money, each with a price. Lenders charge a visible one: the interest rate. Shareholders charge an implicit one: the return they expect for holding riskier, last-in-line claims. WACC blends the two prices, weighted by the funding mix, into the single rate a company must out-earn to create value. Debt gets a discount because interest is tax-deductible — the (1 − tax) term — which is why moderate leverage lowers WACC before bankruptcy risk pushes it back up.
Worked example
A company funded 70% with equity (shareholders expect 8%) and 30% with debt (borrowing at 5%, 21% tax rate): the equity leg contributes 0.70 × 8% = 5.6%, the debt leg 0.30 × 5% × 0.79 = 1.19%, for a WACC of 6.79%. A project returning 8% creates value here; the identical project destroys value at a company whose WACC is 9%. Nudge the discount rate one point in a long DCF and the valuation swings 15-30% — always test a range.
Frequently asked questions
What is WACC used for?→
Two things above all: as the discount rate that converts future cash flows into present value in a DCF, and as the hurdle rate that new projects must beat to be worth funding. It also guides capital structure — the equity/debt mix that minimizes WACC maximizes firm value.
Why is equity more expensive than debt?→
Shareholders get paid last in a bankruptcy and bear the most risk, so they demand higher returns than lenders. Interest is also tax-deductible while dividends are not, making debt doubly cheaper — up to the point where too much of it raises everyone's required return.
What is a typical WACC?→
Mature, stable businesses often land between 6% and 9%; riskier growth companies can run 10-15% or more. It moves with interest rates, the equity risk premium, and the company's own leverage and volatility, so any single number is a snapshot.
No black boxes — the exact formula is shown above · Last reviewed July 2026