WACC calculator

The standard WACC formula (weighted average cost of capital formula) is also written as cost of capital formula when you blend equity, debt, and optional preferred stock:

To calculate WACC step by step:

1. Sum E + D (and P if used) for total capital V.
2. Compute weights E/V, D/V, and P/V.
3. Multiply each weight by its cost — use Rd × (1 − Tc) for debt.
4. Add the contributions for WACC as a decimal; multiply by 100 for WACC %.

When D = 0 and there is no preferred stock, WACC equals Re. The calculator applies these steps live as you type.

Canonical benchmark: market value of equity E = $700,000, debt D = $500,000, cost of equity Re = 15%, cost of debt Rd = 8%, tax rate Tc = 20%, no preferred stock.

Total capital V = $1,200,000. Weights: E/V = 58.33%, D/V = 41.67%. After-tax cost of debt = 8% × (1 − 0.20) = 6.4%.

Equity contribution = 0.5833 × 15% = 8.75%. Debt contribution = 0.4167 × 6.4% = 2.67%. Sum → WACC ≈ 11.42%.

Load the Classic example preset in the calculator above to reproduce this scenario. For a higher-debt mix (E = $400k, D = $600k, Tc = 21%), WACC drops to about 9.79% because debt is cheaper after tax — try the 60% debt mix preset.

Cost of equity (Re) is the return shareholders require for holding the company’s stock. In practice, many analysts estimate Re with the Capital Asset Pricing Model (CAPM) when a reliable beta is available:

CAPM is a starting point, not a verdict: beta can change with leverage, sector peers may be imperfect, and private firms often lack a traded beta. For growth-stage companies, analysts sometimes add a size or company-specific premium on top of CAPM — or use build-up models when CAPM inputs are thin.

In corporate valuation, WACC is the standard discount rate for unlevered free cash flow to the firm (FCFF) or enterprise-level cash flows — because WACC already blends equity and debt costs and reflects the tax shield on debt.

“Discount rate” is the broader label for any rate used to bring future cash flows to present value. WACC is one specific discount rate tied to the whole firm’s financing mix. When you discount equity cash flows only (e.g. dividends or levered FCF to equity), you use cost of equity — not WACC. Match the discount rate to the cash flow definition in your DCF.

WACC weights should use market values of equity and debt — not book values from the balance sheet. Market cap (or an estimated equity value for private firms) reflects what investors pay today; market or fair-value debt captures current yields and credit risk.

Book equity can diverge sharply from market value after growth, write-downs, or intangible assets. Book debt may approximate market debt for recent issuances but can be stale for long-dated bonds. Using book weights skews WACC and your DCF output. For private companies without a ticker, use the latest transaction, appraisal, or comparable multiples to estimate E and D at market-like values.

There is no single “correct” WACC — it varies by industry risk, leverage, geography, and interest-rate environment. The table below shows illustrative US ranges for planning and sanity checks (not a substitute for firm-specific inputs):

Lower-risk, regulated, or asset-heavy sectors often sit at the bottom of these bands; high-growth or cyclical businesses tend toward the top. Always build WACC from your company’s capital structure and costs — then compare to peers rather than copying a mid-range percentage.

A ±1 percentage-point move in WACC can shift enterprise value by 10%–20% in many DCF models — especially when terminal value is a large share of the total. Analysts rarely rely on a single point estimate; they bracket WACC in scenarios before accepting a valuation.

Illustration: a firm generating $100M of free cash flow per year in perpetuity (simplified Gordon-style firm value = FCFF ÷ WACC). Using the Classic example base WACC of 11.42% implies about $876M firm value. The table shows how valuation moves when WACC changes — all else equal:

Use this calculator for the discount-rate input, then stress-test ±1% in your spreadsheet before presenting a DCF. Pair sensitivity with consistent FCFF definitions, terminal growth, and net debt bridge — not WACC alone.

In a DCF valuation, you forecast free cash flow (often FCFF: cash from operations minus reinvestment, before financing payments) and discount each period at WACC. The sum of discounted cash flows plus terminal value gives enterprise value; subtract net debt to reach equity value.

WACC anchors the entire model: a 1–2 percentage-point change in WACC can swing valuation materially, especially when terminal value is a large share of enterprise value. Pair WACC with consistent growth assumptions, explicit forecast years, and a terminal method (perpetuity growth or exit multiple) that matches your cash flow definition. This calculator supplies the discount-rate input; it does not run a full DCF solver.

Watch for these frequent errors when estimating weighted average cost of capital:

• Book-value weights — using balance-sheet equity and debt instead of market values.
• Pre-tax debt cost — forgetting the tax shield: use Rd × (1 − Tc) in the WACC sum.
• Mismatched cash flows — discounting levered equity cash flows at WACC instead of cost of equity.
• Stale beta or ERP — CAPM inputs from a different cycle or country than the company you value.
• Ignoring preferred stock — when preferred equity is material to the capital structure.
• Double-counting risk — inflating Re with premiums already captured in beta or cash-flow forecasts.

Run sensitivity on WACC ±1% when presenting valuations — small input changes often matter more than precision in the third decimal of a discount rate.

Private firms lack a public market cap, so equity value (E) is usually estimated from recent funding rounds, 409A appraisals, comparable public multiples, or a DCF loop. Debt (D) comes from outstanding loans and credit facilities at face or fair value.

For cost of equity, analysts often use CAPM with a peer-group beta (re-levered to the private company’s capital structure) plus a size or illiquidity premium. Cost of debt can be inferred from actual interest expense, bank quotes, or yields on comparable rated debt.

The WACC math is identical to public companies — the challenge is defensible inputs. Document assumptions, use market-like weights, and cross-check against industry ranges and peer transactions rather than a single point estimate.

Build a WACC calculator in Excel or Google Sheets with market values and rates in one row — for example E in B2, D in B3, Re in B4, pre-tax Rd in B5, and tax rate Tc in B6 (as decimals, e.g. 0.20 for 20%).

Format the result as Percentage. With preferred stock in B7 and Rp in B8, extend total capital: =B2+B3+B7 and add +(B7/(B2+B3+B7))*B8 to the WACC sum.

For CAPM cost of equity in Excel: =Rf + Beta*ERP (use consistent decimal or percent units). To match Omni’s canonical example ($700k equity, $500k debt, 15% Re, 8% Rd, 20% tax), the sheet should return 11.42% WACC — load the Classic example preset here to cross-check.

Prefer not to build from scratch? Export CSV from this calculator and paste inputs into your model, or use the PDF breakdown when sharing assumptions with stakeholders.