WACC Calculator

How to use it

Weight the cost of each source of funding by how much of it you use. Equity is priced by the capital asset pricing model; debt is priced at what you would borrow at today, reduced by the tax relief on interest.

Where the number comes from

• Cost of equity uses CAPM: the risk-free rate plus beta multiplied by the equity risk premium.
• Beta scales the market premium — a beta of 1.25 means the equity is expected to be 25% more volatile than the market, so shareholders require more.
• After-tax cost of debt is the borrowing rate multiplied by one minus the tax rate, because interest reduces taxable profit.
• Weights use market values, not book values. Book equity in particular bears little relation to what shareholders have actually put at risk.
• WACC is the sum of each cost multiplied by its weight.
• The tax shield is debt times the borrowing rate times the tax rate — the cash the deduction saves each year.

What goes wrong

The part most calculators leave out.

• The sensitivity table is deliberately misleading if read naively. It shows WACC falling as debt rises because it holds both component costs fixed — in reality equity holders demand more as leverage grows, and lenders raise rates too. Real WACC curves are U-shaped.
• Beta for a private company cannot be observed. The usual approach is to take listed comparables, unlever their betas, and relever at your own capital structure — a chain of estimates, each debatable.
• The equity risk premium is contested. Reasonable practitioners use anything from 4% to 7%, and that range alone moves WACC by well over a point.
• A single company-wide WACC applied to every project systematically over-approves risky projects and rejects safe ones. Project-specific rates are more defensible and much less common.
• Small and illiquid companies are usually valued with a size premium added on top of CAPM. This calculator does not include one.
• The tax shield only has value if you are paying tax. A loss-making company gets no benefit from deductible interest until the losses are used.

Questions

Should I use book or market values for the weights?

Market values. Book equity reflects historical accounting entries rather than what shareholders have at risk today, and using it can distort the weights badly for a company whose value has moved.

How do I find beta for a private company?

Take listed companies in the same business, unlever their observed betas to strip out their capital structures, average them, then relever at your own debt-to-equity ratio. Every step involves judgement, so treat the result as a range.

Does more debt always lower WACC?

Only up to a point, and the table here does not show that point because it holds the component costs constant. As leverage rises, equity holders demand more for the increased risk and lenders charge more, so WACC eventually turns upward.

Should every project use the company WACC?

Strictly, no. WACC reflects the risk of the existing business, so applying it to a project of very different risk misprices it. In practice most companies use one rate and adjust judgementally, which is a known compromise rather than a correct method.

Does anything I type get sent anywhere?

No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.