WACC Calculator
This WACC calculator helps you calculate WACC based on capital structure, cost of equity, cost of debt and tax rate.
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Weighted Average Cost of Capital (WACC) represents a company’s blended cost of capital across all sources, including common shares, preferred shares, and debt. The cost of each type of capital is weighted by its percentage of total capital and they are added together. The purpose of WACC is to determine the cost of each part of the company’s capital structure based on the proportion of equity, debt, and preferred stock it has.
The WACC formula is: WACC = (E/V x Re) + ((D/V x Rd) x (1 – T))
Where:
E = market value of the firm’s equityMarket CapitalizationMarket Capitalization (Market Cap) is the most recent market value of a company’s outstanding shares. Market Cap is equal to the current share price multiplied by the number of shares outstanding. The investing community often uses the market capitalization value to rank companies (market cap)
D = market value of the firm’s debtMarket Value of DebtThe Market Value of Debt refers to the market price investors would be willing to buy a company's debt at, which differs from the book value on the balance sheet. A company’s debt isn't always publicly traded bonds, which have a specified market value. Companies own debt that can be classified as non-traded
V = total value of capital (equity plus debt)
E/V = percentage of capital that is equity
D/V = percentage of capital that is debt
Re = cost of equityCost of EquityCost of Equity is the rate of return a shareholder requires for investing in a business. The rate of return required is based on the level of risk associated with the investment, which is measured as the historical volatility of returns. Learn the cost of equity formula with examples and download the Excel calculator (required rate of return)
Rd = cost of debtCost of DebtThe cost of debt is the return that a company provides to its debtholders and creditors. Cost of debt is used in WACC calculations for valuation analysis. Learn the formula and methods to calculate cost of debt for a company based on yield to maturity, tax rates, credit ratings, interest rates, coupons, and (yield to maturity on existing debt)
T = tax rate
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