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WACC, Weighted Average Cost of Capital
Calculates the weighted average cost of capital by blending the cost of equity with the after-tax cost of debt at their capital-structure weights. Inputs are the equity weight, cost of equity, pre-tax cost of debt, and tax rate.
By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026
From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.
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WACC, Weighted Average Cost of Capital
WACC
11.4%
(E/V)·R_e + (D/V)·R_d·(1 − Tc)
After-tax cost of debt
6.0%
R_d × (1 − Tc)
Debt weight (D/V)
40.0%
100% − equity weight
Equity contribution
9.0%
(E/V) × R_e
Debt contribution
2.4%
(D/V) × after-tax R_d
Debt is cheap twice over, a smaller weight and an after-tax rate, but for a startup the cost of equity is dilution, the costliest source on the menu.
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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.