# Weighted average cost of capital calculator

The Weighted Average Cost of Capital (WACC) is a financial metric that represents the average cost of financing a company’s assets, considering both debt and equity components.

Page written by Ian Hawkins. Last reviewed on June 25, 2024. Next review due July 1, 2025.

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This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

Weighted average cost of capital

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## What is WACC?

WACC stands for weighted average cost of capital. It’s a financial metric used to calculate the overall cost of a company’s capital, taking into account the cost of both debt and equity.

Essentially, WACC represents the average rate of return a company must generate to satisfy all its investors, including shareholders and debt holders. This calculation considers the amount of debt and equity financing in the company’s capital structure, as well as the costs related to each. By including these factors, WACC provides insight into the minimum return a company needs to generate from its investments to keep or increase its overall value. It’s an important tool used in investment decision-making, capital budgeting, and evaluating the financial performance of a company.

## How to calculate weighted average cost of capital

To calculate the weighted average cost of capital:

1. Determine the market value of equity (E) and the market value of debt (D). Add these two values to find the total value of the firm (V).
2. Determine the cost of equity (Re) and the cost of debt (Rd). These are the required rates of return on equity and debt, respectively.
3. Find the corporate tax rate (Tc) applicable to the company.
4. Plug the values into the formula to calculate the WACC.