WACC Calculator

Compute the weighted average cost of capital from CAPM cost of equity, after-tax cost of debt and capital structure weights. Use it as the discount rate in a DCF.

What WACC is

WACC is the blended rate a company pays for all its capital: the cost of equity (what shareholders demand) and the after-tax cost of debt (what lenders charge, reduced by the tax shield on interest). It is the standard discount rate for valuing a whole business in a DCF because it represents the minimum return the company must generate to create value for both equity and debt holders. Use this result as the discount rate input in our two-stage DCF calculator.

CAPM inputs and where to find them

The cost of equity comes from the Capital Asset Pricing Model: Re = risk-free rate + beta × equity risk premium.

Risk-free rate: the current 10-year US Treasury yield.
Beta: the stock's sensitivity to the market, published by most financial data providers. A beta of 1.0 moves with the market; above 1.0 is more volatile.
Equity risk premium: the extra return investors demand for holding stocks over risk-free bonds. A common range is 4–6%.

The pre-tax cost of debt is the weighted average interest rate on the company's borrowings — look at the notes to the financial statements. The tax rate should be the effective tax rate from the income statement, not the statutory rate, because that is what the company actually pays.

Typical WACC ranges by risk profile

These are rough guideposts, not rules:

Mature large-cap: 7–9% — stable cash flows, low beta, access to cheap debt.
Mid-cap: 9–11% — more cyclicality, higher beta, less debt capacity.
High-risk or early-stage: 12%+ — high beta, little or no debt, uncertain cash flows.

If your WACC lands far outside these bands, double-check the beta and equity risk premium first — they are the most subjective inputs.

Why WACC ≠ expected return

WACC is the hurdle rate for the business, not the return you will earn as an investor. Your return depends on the price you pay relative to intrinsic value. A company can have a 9% WACC and still deliver 15% annual returns to shareholders if it earns 20% on invested capital and reinvests at that rate. Conversely, a low-WACC utility bought at an absurd price can deliver poor returns. Use WACC to value the business; use the gap between price and value to estimate your return.

Frequently asked questions

What is WACC?

WACC is the weighted average cost of capital: the blended rate a company must pay its equity and debt holders. It is the standard discount rate for valuing a whole business in a DCF.

How do you calculate WACC?

WACC = (E/V) x Re + (D/V) x Rd x (1 - tax rate). Re is the cost of equity from CAPM (risk-free rate + beta x equity risk premium), Rd is the pre-tax cost of debt, and E/V and D/V are the market-value weights of equity and debt.

Where do I find the inputs for WACC?

Use the current 10-year Treasury yield for the risk-free rate, a published beta from a financial data provider, and a standard equity risk premium of 4-6%. The pre-tax cost of debt is the weighted average interest rate on the company's borrowings, and the tax rate is the effective tax rate from the income statement.

Is WACC the same as expected return?

No. WACC is the minimum return a company must generate to satisfy all its capital providers. Your expected return as an investor depends on the price you pay; WACC tells you the hurdle the business must clear to create value.