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Finance & valuation / FREE CALCULATOR

WACC calculator

Build a weighted average cost of capital from the financing mix and required returns you choose. The breakdown shows what each source contributes to the final rate.

2–5 min · No sign-upHow it works
01 / INPUTS

Set your assumptions

Start with the example, then use your own numbers. Dollar amounts are in USD.

Your assumptions

$ millions. Enter a value in $ millions.

$ millions. Enter a value in $ millions.

$ millions. Enter a value in $ millions.

%. Required annual equity return. Enter 12 for 12%.

%. Current borrowing cost, not necessarily an existing coupon.

%. Required preferred return; ignored when preferred value is zero.

%. Assumes interest is deductible at this rate. Enter 0 if no tax shield applies.

Calculator values stay in this page. No account or email required.

02 / YOUR RESULT

Weighted average cost of capital

10.5%

Equity weight
80%
Debt weight
20%
Preferred stock weight
0%
After-tax cost of debt
4.5%
Total market value of capital ($m)
1,000
Show the work
ComparisonCapital weightCost after debt tax shieldWACC contribution
Common equity80%12%9.6%
Debt20%4.5%0.9%
Preferred stock0%8%0%
  • Uses market-value capital weights. Only debt receives the entered interest tax shield; preferred stock does not.
  • The tax adjustment assumes interest is deductible at the entered rate. Match the currency, risk and nominal or real basis of the discount rate to the cash flows being valued.

THE METHOD

How this calculator works

WACC = (E ÷ V × Re) + (D ÷ V × Rd × (1 − T)) + (P ÷ V × Rp), where V = E + D + P.

Choose weights that match the valuation

Equity, debt and preferred stock are weights in the financing mix. Use market values or a supported target capital structure consistently. Enter all three financing values in millions of the same currency.

Costs of capital are required return assumptions, not the balance-sheet values themselves. This calculator takes those rates as inputs; it does not estimate beta, the equity risk premium or the current borrowing spread.

Trace the tax adjustment

The simplified model applies the tax adjustment to debt interest. It does not apply the same deduction to common equity or preferred stock. Set preferred value to zero when that financing source is absent.

A model can produce a precise number from weak assumptions. Explain why the borrowing cost, tax rate and capital mix fit the business, and test alternate rates in the DCF calculator.

WORKED EXAMPLE

An 80% equity, 20% debt financing mix

With $800m equity at a 12% cost, $200m debt at a 6% pretax cost, no preferred stock and a 25% tax rate, equity contributes 9.6 percentage points. Debt contributes 0.9 percentage points after tax. WACC is 10.5%.

Assumptions and limits

  • All financing values use the same unit and at least one financing source has a positive value.
  • The model assumes the entered tax rate applies to the debt-interest deduction.
  • Debt limits, tax-loss positions, changing leverage and separate business segments are not modeled.
  • Rates are entered as percentages: enter 12 for 12%, not 0.12.

Common questions

Should WACC use book values or market values?

A valuation normally uses market-value weights or a supported target financing mix. Book values can differ substantially, especially for equity. Keep the chosen basis consistent and explain any proxy you use.

How does preferred stock affect WACC?

It receives its own weight and required return. The calculator includes that contribution without a debt-style tax adjustment. Whether total WACC rises or falls depends on the complete financing mix and entered costs.

Is WACC the right discount rate for every cash flow?

No. This WACC is intended for operating cash flow available to the firm’s capital providers. Cash flow to common equity requires a matching equity discount rate and financing assumptions.

Sources and methodology

Reviewed November 6, 2026. Sources support the method described above. Examples are illustrative; results depend on your inputs and require your review.