WACC Calculator

Calculate weighted average cost of capital from cost of equity, debt, tax rate, and capital structure.

Capital structure inputs

Estimate weighted average cost of capital from equity, debt, tax rate, and required returns.

WACC

8.69%

Pre-tax capital cost

9%

After-tax debt cost

4.74%

Enterprise value

$100,000,000

Equity weight

75%

Debt weight

25%

Annual tax shield

$315,000

Debt interest multiplied by tax rate.

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What is the WACC calculator?

WACC, or weighted average cost of capital, is the average cost a company pays for equity and debt capital. In DCF valuation and project review, it is the hurdle rate that future cash flows must exceed to create value.

The calculator combines CAPM-based cost of equity, after-tax cost of debt, market-value capital structure, tax rate, and optional risk premiums. It also supports sensitivity analysis for beta, leverage, and tax assumptions.

WACC formula and components

Main formula

  • WACC = (E / V x Re) + (D / V x Rd x (1 - Tc)).
  • E is market value of equity, usually market capitalization.
  • D is market value of debt, often net debt in practical Korean equity analysis.
  • V equals E + D, Re is cost of equity, Rd is borrowing rate, and Tc is corporate tax rate.

CAPM and tax shield

  • Cost of equity by CAPM = risk-free rate + beta x market risk premium + additional risk premium.
  • The Korean guide uses 3-year Korean treasury yield 3.5% as a default risk-free rate, beta 1.2, and market risk premium 6.0%.
  • After-tax cost of debt = borrowing rate x (1 - corporate tax rate). Borrowing at 4.5% with a 25% corporate tax rate gives 3.375% after tax.
  • Korean corporate tax is described as 9% to 25% depending on taxable income, with 25% used as the default in the source page.

Interpretation and use

WACC grade bands

  • S: 5% or lower, very low capital cost.
  • A: 5% to 8%, low capital cost.
  • B: 8% to 12%, ordinary range for many companies.
  • C: 12% to 15%, high capital cost.
  • D: 15% to 20%, very high capital cost.
  • F: above 20%, excessive cost that requires a business-sustainability check.

DCF, projects, capital structure, and M&A

  • In DCF, WACC discounts future free cash flows. Lower WACC produces higher enterprise value, so sensitivity analysis is essential.
  • For projects, if expected IRR is higher than WACC, the project creates value; if IRR is lower, it destroys shareholder value.
  • More debt can lower WACC through the tax shield, but excessive debt increases credit risk. The theoretical optimum is the debt ratio where WACC is minimized.
  • For private companies, add country risk, size risk, or company-specific risk premiums. The source suggests 1% to 3% for emerging-market or small-company adjustments and 2% to 5% for small-stock risk in DCF contexts.