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WACC Calculator 2026

Free WACC calculator to compute your company's weighted average cost of capital instantly. Calculate cost of equity, debt, and capital structure for investment decisions.

Last revised 29 August 2026

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Capital Structure & Costs

Cost of Equity (%)

Expected return required by equity investors (e.g., CAPM).

Cost of Debt (%)

Interest rate on the company's debt (pre-tax).

Corporate Tax Rate (%)

Effective tax rate applied to interest expense.

Equity Weight (% of capital)

Proportion of capital from equity (e.g., 60%).

Debt Weight (% of capital)

Proportion of capital from debt (e.g., 40%).

Add preferred stock as a separate capital component.

Preferred Weight (% of capital)

Proportion of capital from preferred stock.

Cost of Preferred (%)

Dividend yield on preferred stock.

Round To (Decimal Places)

Number of decimal places for percentages.

Financial Disclaimer: This calculator provides a general educational estimate only, based on the cost-of-equity, cost-of-debt, and capital-structure weights you enter. It is not financial or investment advice — WACC is highly sensitive to these inputs, and market-based figures like cost of equity and beta require independent verification, not guesswork. Always consult a qualified financial professional before using WACC in an investment or valuation decision. Full disclaimer.

Sources & methodology

Formula:: Standard weighted-average-cost-of-capital formula used throughout corporate finance and taught in CFA Institute curricula.
Reference:: Aswath Damodaran, NYU Stern School of Business
Content last updated:: August 2026
Scheduled re-verification:: August 2027

Calculation type: Exact calculation. Figures are taken from Aswath Damodaran, NYU Stern School of Business — see sources below.

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Formula & methodology

Formula used

WACC = (E/V × Re) + (D/V × Rd × (1 − Tax Rate))

Takes the fraction of the company's financing that comes from equity and multiplies it by how much return equity investors require, then takes the fraction that comes from debt and multiplies it by how much interest the company pays after accounting for the tax savings on that interest — and adds the two together into one blended borrowing-and-financing cost.

Origin: Standard weighted-average-cost-of-capital formula used throughout corporate finance and taught in CFA Institute curricula.

Variable definitions

Symbol	Meaning	Unit
E/V	Equity weight. Proportion of total capital financed by equity.	percent
Re	Cost of equity. Required return demanded by equity investors, often estimated via CAPM.	percent
D/V	Debt weight. Proportion of total capital financed by debt.	percent
Rd	Cost of debt. Pre-tax interest rate the company pays on its debt.	percent
Tax Rate	Corporate tax rate. Effective tax rate applied to interest expense, creating the debt tax shield.	percent

Limitations

WACC is highly sensitive to its inputs — the cost of equity in particular usually depends on an assumed beta and market risk premium, both of which vary by data source and time period.
This calculator assumes the entered weights and rates are already correct and current; it does not source or verify market values, beta, or interest rates on your behalf.

This page is educational. It applies a standard formula to the figures you enter and shows the arithmetic behind the result. It is an estimate, not an offer, a quotation or financial advice: real costs depend on the provider's pricing, fees and underwriting, and on circumstances this calculator does not collect.

Sources & references

GuidelineInvestment Valuation: Tools and Techniques for Determining the Value of Any Asset — Aswath Damodaran, NYU Stern School of Business
Standard academic and practitioner reference for the WACC formula and its components (cost of equity via CAPM, after-tax cost of debt, market-value capital weights) that this calculator implements.

Help & FAQs

Frequently Asked Questions

Clear answers to common questions to help you use this calculator confidently.

What does WACC stand for?

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WACC stands for Weighted Average Cost of Capital. It's the average rate of return a company must pay to finance its assets through a mix of equity and debt, weighted by their proportions in the capital structure.

What is a good WACC percentage?

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'Good' WACC varies by industry and company risk. Tech companies may have WACC of 8-12% due to growth expectations. Utilities often have 4-6% due to stability. Generally, WACC under 8% is excellent, 8-12% is typical, and above 15% signals high risk or excessive debt.

Should I use book value or market value for capital structure?

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Always use market values. Book values from financial statements are historical and don't reflect current economic reality. Market value = current market prices. For equity: shares outstanding × stock price. For debt: current market prices of bonds or refinancing rates. Market values are what investors actually invested.

Should I accept a project if its return exceeds WACC?

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Yes. If a project's expected return (or IRR) exceeds WACC, it creates value for shareholders. The project's return must surpass your cost of capital. If IRR > WACC, the project's NPV is positive and should be accepted (assuming adequate cash flow and risk tolerance).

Can WACC be negative?

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No, WACC cannot be negative. Both cost of equity and cost of debt are positive (investors always require positive returns). If calculations show negative WACC, it indicates an error in inputs or assumptions. Check that equity/debt values are positive and costs of capital exceed zero.

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How to Use This Calculator

Enter Cost of Equity

Input the expected return required by equity investors (e.g., from CAPM).

Enter Cost of Debt

Provide the pre-tax interest rate on the company's debt.

Set Corporate Tax Rate

Enter the effective tax rate to calculate the after-tax cost of debt.

Define Capital Structure

Specify the percentage weights of equity, debt, and preferred stock.

Review WACC

Instantly see the weighted average cost of capital, a key input for valuation and capital budgeting.

Understanding Your Results

WACC (Weighted Average Cost of Capital)
The blended cost of all capital sources (equity, debt, preferred) weighted by their proportion in the company's capital structure.
Cost of Equity
The return required by equity investors, often estimated using CAPM (Risk-Free Rate + Beta × Market Risk Premium).
Cost of Debt
The interest rate the company pays on its debt. It is tax-deductible, so the after-tax cost is used.
Capital Structure Weights
The percentage of total capital represented by each component (equity, debt, preferred). Typically based on market values.

Key Tips

✓
Always use market values (market cap for equity, market price × shares outstanding) – book values from the balance sheet seriously understate equity weight.
✓
Compute cost of equity using CAPM: Re = Rf + β × (Rm − Rf). The risk-free rate, beta, and equity risk premium must be current and sourced from reliable data.
✓
The after-tax cost of debt is Rd × (1 − Tax) – this tax shield exists because interest expense is deductible, making debt cheaper than it first appears.
✓
Check that equity weight + debt weight + preferred weight = 100% – a common error is entering weights that don't sum to 100%, producing a meaningless WACC.
✓
WACC is the minimum hurdle rate for all corporate investments – any project earning less than WACC destroys shareholder value.
✓
Different divisions within the same company may have different risk profiles and should use division-specific WACC, not a single corporate-wide rate.
✓
Sensitivity test your WACC by varying the cost of equity by ±2% and debt ratio by ±10% – small changes can swing DCF valuations by millions.
✓
For unlisted companies, estimate beta from a peer group of publicly traded comparables and adjust for differences in leverage (unlever and relever beta).
✓
WACC is forward-looking – use target capital structure weights, not historical. If the company plans to increase debt, reflect that in your weights.
✓
Compare your WACC to industry averages – a WACC far above peers signals high perceived risk; far below may indicate undervaluation or aggressive assumptions.

WACC Decoded – The Single Most Important Number in Corporate Finance

What Is WACC? A Plain-English Introduction

WACC (Weighted Average Cost of Capital) is the average price a company pays to use other people's money. Every company is funded by a mix of sources – mainly shareholders (equity) and lenders/bondholders (debt) – and each of those sources charges the company for the privilege. Shareholders expect the company to grow their investment over time; lenders charge interest. WACC blends those two costs into a single percentage that answers the question: 'Overall, what rate of return does this company need to earn just to keep everyone who financed it happy?' If you've never touched a corporate-finance concept before, think of WACC as a company's version of a mortgage rate – except instead of one interest rate, it's a blend of two (or three) different financing costs, weighted by how much of each the company actually uses.

The Building Blocks: Cost of Equity, Cost of Debt, and Capital Structure

Cost of equity is the return shareholders require for the risk of owning stock in the company – it's not a rate the company pays out directly like an interest bill, but if the company doesn't deliver it, investors will sell their shares and the stock price will fall. Cost of debt is simpler: it's the interest rate the company pays lenders and bondholders, and unlike equity, this is a real contractual payment. Capital structure is just the mix – what percentage of the company's total financing comes from equity versus debt (e.g., 60% equity, 40% debt). The tax shield is the one wrinkle: interest payments on debt are tax-deductible, so debt's true cost to the company is lower than its stated interest rate once the tax savings are factored in. WACC combines all three ideas – it takes each cost, weights it by how much of the capital structure it represents, and adds them together.

The WACC Formula, Explained in Words

The formula is WACC = (E/V) × Re + (D/V) × Rd × (1 − Tax Rate), where E is the market value of equity, D is the market value of debt, V is E + D (total capital), Re is cost of equity, and Rd is the pre-tax cost of debt. In plain terms: figure out what fraction of the company's financing is equity and multiply that fraction by the cost of equity; figure out what fraction is debt and multiply that fraction by the after-tax cost of debt; add the two results together. Weighting by proportion makes intuitive sense – if a company is financed 90% by cheap debt and only 10% by expensive equity, its overall cost of capital should be much closer to the debt rate than a company financed the opposite way. The (1 − Tax Rate) adjustment exists purely because of the tax shield described above: a 6% loan with a 25% tax rate really only costs the company 4.5%, because the interest deduction saves 1.5% in taxes.

How to Estimate the Cost of Equity (CAPM)

Cost of equity is harder to observe directly than cost of debt because shareholders don't send the company an invoice. The standard estimation method is CAPM (Capital Asset Pricing Model): Re = Risk-Free Rate + Beta × Market Risk Premium. The risk-free rate is what you could earn with virtually no risk, usually approximated by long-term government bond yields. Beta measures how much more (or less) a company's stock swings compared to the overall market – a beta of 1.3 means the stock tends to move 30% more than the market in either direction. The market risk premium is the extra return investors historically demand for holding stocks instead of risk-free bonds (commonly estimated around 4-6%). Multiplying beta by the risk premium answers: how much extra return does this specific, riskier stock need to offer over the risk-free rate?

Interpreting Your Result – What's a Typical or 'Good' WACC?

There's no universal 'good' WACC – it depends entirely on the type of business. Stable, regulated businesses like utilities typically run 5-7% because their cash flows are predictable and low-risk. Large, established companies often fall in the 7-10% range. Higher-growth or higher-risk businesses, including many technology companies, often run 10-14%, and companies in emerging markets or unstable industries can run higher still. The most useful way to read your result is relatively, not absolutely: compare it to companies in the same industry, and compare it to the return the company's projects are expected to generate. A project or investment expected to return less than WACC is expected to destroy value; one expected to return more than WACC is expected to create value. That's why WACC is often called the company's 'hurdle rate.'

Common Mistakes and Limitations

WACC is extremely sensitive to its inputs, and small errors compound into large mistakes. The most common error is using book values (accounting figures from the balance sheet) instead of market values (what the equity and debt are actually worth today) for the weights – this can badly distort the result, especially for growth companies whose market value is far above book value. Another common trap is circularity in valuation: WACC is often used to value a company, but estimating WACC itself sometimes depends on assumptions (like target capital structure or market value of equity) that are exactly what you're trying to solve for – in practice this is handled by iterating or using current market weights as a reasonable starting point. Beta and the market risk premium also vary meaningfully depending on the data source and time period used, so two analysts can reasonably compute noticeably different WACCs for the same company. Treat WACC as a considered estimate, not a precise, unarguable number.

Where WACC Is Used in the Real World

WACC's best-known use is as the discount rate in Discounted Cash Flow (DCF) valuation, where it converts a company's projected future cash flows into a present-day value – see our DCF calculator for that application. Beyond valuation, companies use WACC as the 'hurdle rate' in capital budgeting: a new factory, product line, or acquisition is only worth pursuing if its expected return clears the company's WACC. It also shows up in mergers and acquisitions (to judge whether a deal price is justified by the target's expected returns), in performance measurement (comparing a business unit's return on invested capital against WACC to see if that unit is creating or destroying value), and in utility rate regulation (regulators use a utility's WACC to decide what return it's allowed to earn on infrastructure investment).

Formula & methodology

Formula used

WACC = (E/V × Re) + (D/V × Rd × (1 − Tax Rate))

Origin: Standard weighted-average-cost-of-capital formula used throughout corporate finance and taught in CFA Institute curricula.

Variable definitions

Symbol	Meaning	Unit
E/V	Equity weight. Proportion of total capital financed by equity.	percent
Re	Cost of equity. Required return demanded by equity investors, often estimated via CAPM.	percent
D/V	Debt weight. Proportion of total capital financed by debt.	percent
Rd	Cost of debt. Pre-tax interest rate the company pays on its debt.	percent
Tax Rate	Corporate tax rate. Effective tax rate applied to interest expense, creating the debt tax shield.	percent

Limitations

WACC is highly sensitive to its inputs — the cost of equity in particular usually depends on an assumed beta and market risk premium, both of which vary by data source and time period.
This calculator assumes the entered weights and rates are already correct and current; it does not source or verify market values, beta, or interest rates on your behalf.

Sources & references

GuidelineInvestment Valuation: Tools and Techniques for Determining the Value of Any Asset — Aswath Damodaran, NYU Stern School of Business

Standard academic and practitioner reference for the WACC formula and its components (cost of equity via CAPM, after-tax cost of debt, market-value capital weights) that this calculator implements.

Calculator inputs

Capital Structure & Costs

Your results

Sources & methodology

Formula & methodology

Formula used

Variable definitions

Limitations

Sources & references

What does WACC stand for?

What is a good WACC percentage?

Should I use book value or market value for capital structure?

Should I accept a project if its return exceeds WACC?

Can WACC be negative?

Related calculators

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Calculator inputs

Capital Structure & Costs

Your results

Sources & methodology

How to Use This Calculator

Example WACC Analysis – Mid-Sized Technology Company

Understanding Your Results

Key Tips

WACC Decoded – The Single Most Important Number in Corporate Finance

What Is WACC? A Plain-English Introduction

The Building Blocks: Cost of Equity, Cost of Debt, and Capital Structure

The WACC Formula, Explained in Words

How to Estimate the Cost of Equity (CAPM)

Interpreting Your Result – What's a Typical or 'Good' WACC?

Common Mistakes and Limitations

Where WACC Is Used in the Real World

Formula & methodology

Formula used

Variable definitions

Limitations

Sources & references

How to Use This Calculator

Example WACC Analysis – Mid-Sized Technology Company

Understanding Your Results

Key Tips

WACC Decoded – The Single Most Important Number in Corporate Finance

What Is WACC? A Plain-English Introduction

The Building Blocks: Cost of Equity, Cost of Debt, and Capital Structure

The WACC Formula, Explained in Words

How to Estimate the Cost of Equity (CAPM)

Interpreting Your Result – What's a Typical or 'Good' WACC?

Common Mistakes and Limitations

Where WACC Is Used in the Real World