WACC Calculator: Weighted Average Cost of Capital (with CAPM)
WACC is the average return a company must earn to satisfy both its shareholders and its lenders — the standard discount rate for valuations and project decisions.
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The WACC Formula
Cost of equity (CAPM) = Risk-free rate + Beta × Equity risk premium
Example: 6 million of equity and 4 million of debt, a 4.5% risk-free rate, beta 1.2 and a 5.5% equity risk premium give a cost of equity of 11.1%. With 8% debt and a 25% tax rate, the after-tax cost of debt is 6% and the WACC is 9.06%.
Works in any currency — enter all amounts in the same one.
Where to Find Each Input
| Input | Where to find it |
|---|---|
| Equity value | Market capitalisation (share price × shares) for listed companies |
| Debt value | Total borrowings from the balance sheet |
| Risk-free rate | The current 10-year government bond yield in your country |
| Beta | Financial data sites list it for listed shares; 1.0 means market-average risk |
| Equity risk premium | Commonly assumed at 4%–7% |
| Cost of debt | The interest rate the company pays on new borrowing |
| Tax rate | The company’s marginal corporate tax rate |
Why Debt Lowers WACC (Up to a Point)
Interest is tax-deductible and lenders accept lower returns than shareholders, so adding some debt reduces WACC. Too much debt raises the risk for both lenders and shareholders, pushing both costs up again.
Frequently Asked Questions
What is a good WACC?
There is no single good value — it reflects risk. Large stable companies often have WACCs of 6%–9%; smaller or riskier ones 10%–15% or more.
Why is the cost of debt after tax?
Interest payments reduce taxable profit, so the real cost to the company is lower than the stated interest rate.
What does beta mean?
Beta measures how much a share moves with the market. Above 1 means more volatile than the market, below 1 means less.
How is WACC used?
As the discount rate in NPV and DCF calculations, and as the minimum return a new project must earn.