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.

Interactive Tool

Equity weight (E/V)

Cost of equity (R_e)

Pre-tax cost of debt (R_d)

Tax rate (Tc)

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.

Learn the concept

This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.

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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.