WACC calculator
Blend your cost of equity and after-tax cost of debt into the discount rate every DCF and investment decision hinges on.
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WACC
What it measures
Weighted Average Cost of Capital (WACC) is the average rate a company expects to pay to finance its assets. It combines the cost of equity (shareholders) and the cost of debt (lenders).
When to use it
Used as the discount rate in DCF models. If a company's WACC is 8%, a new project must return more than 8% to create value.
Watch out for
Debt is usually cheaper than equity because interest is tax-deductible (the tax shield). Too much debt, however, raises the risk of bankruptcy.
Read the guide: What is WACC? The Discount Rate Explained Simply
WACC
The blended cost of a company's debt and equity.
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 (captured by 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%, so always test a range.
Common 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.
Last reviewed July 2026