# What is my WACC?

Computes the weighted average cost of capital (WACC) from the market values and costs of equity, debt and preferred stock, with debt counted after tax.

- Page: https://www.acalculator.org/finance/wacc-calculator
- JSON spec: https://www.acalculator.org/finance/wacc-calculator.json
- Version: b47709e3baef

## Default answer

Example with the default inputs (Market value of equity $756,000,000.00, Cost of equity 13.4%, Market value of debt $244,000,000.00, Cost of debt (before tax) 6.312%, Tax rate 21%, Market value of preferred stock $0.00, Cost of preferred stock 0%): With 75.6% equity, 24.4% debt and 0% preferred stock, the WACC is 11.35%.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| e | Market value of equity | Share price times shares outstanding. |
| re | Cost of equity | The return shareholders require, for example from CAPM. |
| d | Market value of debt | What the company’s bonds and loans are worth today. |
| rd | Cost of debt (before tax) | The yield to maturity on the company’s debt. |
| t | Tax rate | The corporate tax rate that interest is deducted at. |
| p | Market value of preferred stock | Leave at 0 if there is none. |
| rp | Cost of preferred stock | Preferred dividend ÷ preferred share price. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| wacc | WACC | The weighted average cost of capital. |
| afterTaxDebt | After-tax cost of debt | Cost of debt × (1 − tax rate). |
| total | Total capital | Equity + debt + preferred stock. |
| equityWeight | Equity weight | Equity ÷ total capital. |
| debtWeight | Debt weight | Debt ÷ total capital. |
| preferredWeight | Preferred weight | Preferred stock ÷ total capital. |

## Method

WACC = E ÷ V × re + D ÷ V × rd × (1 − T) + P ÷ V × rp, where V = E + D + P are market values, re, rd and rp the costs of equity, debt and preferred stock, and T the tax rate.

## Assumptions

- Weights use the market values you type, not book values.
- Interest on debt is tax-deductible at the tax rate you type; preferred dividends and equity returns are not.
- Arithmetic is exact on the typed decimals; results round once for display.

## Worked examples

1. e = $756.00, re = 13.4%, d = $244.00, rd = 6.312%, t = 21% gives wacc = 11.347101%, afterTaxDebt = 4.98648%. Source: OpenStax, Principles of Finance, 17.3 Calculating the Weighted Average Cost of Capital (WACC = D% × rd(1 − T) + P% × rpfd + E% × re). https://openstax.org/books/principles-finance/pages/17-3-calculating-the-weighted-average-cost-of-capital.
2. e = $600,000.00, re = 10%, d = $400,000.00, rd = 5%, t = 25% gives wacc = 7.5%, afterTaxDebt = 3.75%, equityWeight = 60%, debtWeight = 40%. Source: OpenStax, Principles of Finance, 17.3 Calculating the Weighted Average Cost of Capital (WACC = D% × rd(1 − T) + P% × rpfd + E% × re). https://openstax.org/books/principles-finance/pages/17-3-calculating-the-weighted-average-cost-of-capital.
3. e = $500.00, re = 12%, d = $300.00, rd = 6%, t = 21%, p = $200.00, rp = 8% gives wacc = 9.022%, preferredWeight = 20%. Source: OpenStax, Principles of Finance, 17.3 Calculating the Weighted Average Cost of Capital (WACC = D% × rd(1 − T) + P% × rpfd + E% × re). https://openstax.org/books/principles-finance/pages/17-3-calculating-the-weighted-average-cost-of-capital.

## FAQ

### What is WACC?

WACC, the weighted average cost of capital, is the average return a company must pay the people who fund it: shareholders, lenders and preferred shareholders. Each cost counts in proportion to how much of the company’s capital it supplies.

### How do I calculate WACC?

Add up the market values of equity, debt and preferred stock to get the total V. Multiply each cost by its share of V, using the cost of debt after tax, and add the results. With 60% equity at 10% and 40% debt at 5% before a 25% tax, WACC = 0.6 × 10% + 0.4 × 5% × 0.75 = 7.5%.

### Why is the cost of debt taken after tax?

Interest is a deductible expense, so each dollar of interest lowers the company’s tax bill by the tax rate. A 6.312% yield at a 21% tax rate costs the company 6.312% × (1 − 0.21) = 4.986% after tax.

### Should I use market values or book values?

Market values are the usual choice, because they show what investors would pay for the company’s equity and debt today. Book values from the balance sheet can be far from that, mainly for equity.

### How do I estimate the cost of equity?

Two common ways are the capital asset pricing model (CAPM): risk-free rate + beta × market risk premium, and the constant dividend growth model: next year’s dividend ÷ share price + growth rate. Type the result in the cost of equity box.

### What is WACC used for?

WACC is the usual discount rate for a project with the same risk as the company as a whole. A project whose return is above the WACC adds value; one below it does not. You can use it as the rate in an NPV or as the hurdle for an IRR.

## Sources

- OpenStax, Principles of Finance, 17.3 Calculating the Weighted Average Cost of Capital: the WACC formula and the Bluebonnet Industries example (24.4% debt, 75.6% equity, 13.4% cost of equity). https://openstax.org/books/principles-finance/pages/17-3-calculating-the-weighted-average-cost-of-capital (retrieved 2026-10-05)
- OpenStax, Principles of Finance, 17.2 The Costs of Debt and Equity Capital: Bluebonnet’s 6.312% yield to maturity, 21% tax rate and 4.986% after-tax cost of debt. https://openstax.org/books/principles-finance/pages/17-2-the-costs-of-debt-and-equity-capital (retrieved 2026-10-05)