Determine the optimal financial structure for your business valuation
WACC Calculator
Total market capitalization or equity value ($).
Please enter a valid positive number.
Total interest-bearing debt ($).
Please enter a valid positive number.
Expected return by shareholders (e.g., via CAPM).
Please enter a valid percentage.
Interest rate paid on debt before tax.
Please enter a valid percentage.
Effective corporate tax rate.
Please enter a valid percentage (0-100).
Weighted Average Cost of Capital (WACC)
8.25%
Formula: (E/V × Re) + ((D/V × Rd) × (1 – T))
Financial Breakdown
Total Capital (V)$7,000,000
Equity Weight (E/V)71.43%
Debt Weight (D/V)28.57%
After-Tax Cost of Debt3.95%
Capital Structure Summary
Component
Market Value
Weight
Cost (%)
Weighted Cost
Equity
$5,000,000
71.43%
10.50%
7.50%
Debt (After Tax)
$2,000,000
28.57%
3.95%
0.75%
Total
$7,000,000
100%
–
8.25%
Breakdown of how equity and debt contribute to the final WACC figure.
Capital Mix Visualization
Equity
Debt
Visual representation of the firm's capital structure weights.
// Use var for compatibility as requested
var chartInstance = null;
window.onload = function() {
calculateWACC();
};
function calculateWACC() {
// Get inputs
var equity = parseFloat(document.getElementById('equityValue').value);
var debt = parseFloat(document.getElementById('debtValue').value);
var costEquity = parseFloat(document.getElementById('costEquity').value);
var costDebt = parseFloat(document.getElementById('costDebt').value);
var taxRate = parseFloat(document.getElementById('taxRate').value);
// Validation
var isValid = true;
if (isNaN(equity) || equity < 0) {
document.getElementById('error-equity').style.display = 'block';
isValid = false;
} else {
document.getElementById('error-equity').style.display = 'none';
}
if (isNaN(debt) || debt < 0) {
document.getElementById('error-debt').style.display = 'block';
isValid = false;
} else {
document.getElementById('error-debt').style.display = 'none';
}
if (isNaN(costEquity)) {
document.getElementById('error-costEquity').style.display = 'block';
isValid = false;
} else {
document.getElementById('error-costEquity').style.display = 'none';
}
if (isNaN(costDebt)) {
document.getElementById('error-costDebt').style.display = 'block';
isValid = false;
} else {
document.getElementById('error-costDebt').style.display = 'none';
}
if (isNaN(taxRate) || taxRate 100) {
document.getElementById('error-taxRate').style.display = 'block';
isValid = false;
} else {
document.getElementById('error-taxRate').style.display = 'none';
}
if (!isValid) return;
// Calculations
var totalValue = equity + debt;
// Prevent division by zero
if (totalValue === 0) totalValue = 1;
var weightEquity = equity / totalValue;
var weightDebt = debt / totalValue;
var taxFactor = 1 – (taxRate / 100);
var afterTaxCostDebt = costDebt * taxFactor;
var waccDecimal = (weightEquity * (costEquity / 100)) + (weightDebt * (afterTaxCostDebt / 100));
var waccPercent = waccDecimal * 100;
// Update Main Results
document.getElementById('result-wacc').innerText = waccPercent.toFixed(2) + "%";
document.getElementById('result-total-capital').innerText = formatCurrency(totalValue);
document.getElementById('result-equity-weight').innerText = (weightEquity * 100).toFixed(2) + "%";
document.getElementById('result-debt-weight').innerText = (weightDebt * 100).toFixed(2) + "%";
document.getElementById('result-after-tax-debt').innerText = afterTaxCostDebt.toFixed(2) + "%";
// Update Table
document.getElementById('table-equity-val').innerText = formatCurrency(equity);
document.getElementById('table-equity-weight').innerText = (weightEquity * 100).toFixed(2) + "%";
document.getElementById('table-equity-cost').innerText = costEquity.toFixed(2) + "%";
document.getElementById('table-equity-wcost').innerText = (weightEquity * costEquity).toFixed(2) + "%";
document.getElementById('table-debt-val').innerText = formatCurrency(debt);
document.getElementById('table-debt-weight').innerText = (weightDebt * 100).toFixed(2) + "%";
document.getElementById('table-debt-cost').innerText = afterTaxCostDebt.toFixed(2) + "%";
document.getElementById('table-debt-wcost').innerText = (weightDebt * afterTaxCostDebt).toFixed(2) + "%";
document.getElementById('table-total-val').innerText = formatCurrency(totalValue);
document.getElementById('table-total-wacc').innerText = waccPercent.toFixed(2) + "%";
// Update Chart
drawChart(weightEquity, weightDebt);
}
function formatCurrency(num) {
return "$" + num.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
}
function drawChart(wEquity, wDebt) {
var canvas = document.getElementById('waccChart');
if (!canvas.getContext) return;
var ctx = canvas.getContext('2d');
var width = canvas.width;
var height = canvas.height;
// Clear canvas
ctx.clearRect(0, 0, width, height);
// Bar chart settings
var barHeight = 80;
var startY = (height – barHeight) / 2;
var totalWidth = width – 40; // 20px padding
var startX = 20;
var equityWidth = totalWidth * wEquity;
var debtWidth = totalWidth * wDebt;
// Draw Equity Bar
ctx.fillStyle = '#004a99';
ctx.fillRect(startX, startY, equityWidth, barHeight);
// Draw Debt Bar
ctx.fillStyle = '#28a745';
ctx.fillRect(startX + equityWidth, startY, debtWidth, barHeight);
// Draw text labels
ctx.fillStyle = '#ffffff';
ctx.font = 'bold 16px Arial';
ctx.textAlign = 'center';
ctx.textBaseline = 'middle';
if (wEquity > 0.15) {
ctx.fillText((wEquity * 100).toFixed(1) + "%", startX + (equityWidth / 2), startY + (barHeight / 2));
}
if (wDebt > 0.15) {
ctx.fillText((wDebt * 100).toFixed(1) + "%", startX + equityWidth + (debtWidth / 2), startY + (barHeight / 2));
}
}
function resetCalculator() {
document.getElementById('equityValue').value = 5000000;
document.getElementById('debtValue').value = 2000000;
document.getElementById('costEquity').value = 10.5;
document.getElementById('costDebt').value = 5.0;
document.getElementById('taxRate').value = 21.0;
calculateWACC();
}
function copyResults() {
var wacc = document.getElementById('result-wacc').innerText;
var equity = document.getElementById('equityValue').value;
var debt = document.getElementById('debtValue').value;
var text = "WACC Calculation Results:\n";
text += "WACC: " + wacc + "\n";
text += "Equity Value: $" + equity + "\n";
text += "Debt Value: $" + debt + "\n";
text += "Generated by WACC Calculator.";
// Create temporary textarea to copy
var tempInput = document.createElement("textarea");
tempInput.value = text;
document.body.appendChild(tempInput);
tempInput.select();
document.execCommand("copy");
document.body.removeChild(tempInput);
var btn = document.querySelector('.btn-copy');
var originalText = btn.innerText;
btn.innerText = "Copied!";
setTimeout(function() {
btn.innerText = originalText;
}, 2000);
}
What is Calculate Weighted Average Cost of Capital Excel?
When financial analysts need to determine the minimum return a company must earn on its existing asset base to satisfy its creditors, owners, and other capital providers, they look to calculate weighted average cost of capital excel models. The Weighted Average Cost of Capital (WACC) serves as a critical financial metric that represents the average rate a business pays to finance its assets.
WACC is calculated by multiplying the cost of each capital component (equity and debt) by its proportional weight, and then summing the results. Unlike a simple interest rate, the WACC provides a holistic view of the company's capital structure. It is widely used by investment bankers, corporate finance professionals, and investors to evaluate investment opportunities and conduct discounted cash flow (DCF) analyses.
While the concept is theoretically straightforward, the ability to accurately calculate weighted average cost of capital excel requires a solid understanding of market values, tax shields, and risk premiums. Miscalculating this figure can lead to poor investment decisions, such as rejecting profitable projects or accepting value-destroying ones.
Calculate Weighted Average Cost of Capital Excel: Formula and Math
To successfully calculate weighted average cost of capital excel, you must understand the underlying mathematics. The formula blends the cost of equity and the after-tax cost of debt based on how much of the company is funded by each.
WACC = (E/V × Re) + ((D/V × Rd) × (1 – T))
Where V = E + D (Total Value = Equity + Debt).
Variable
Meaning
Unit
Typical Range
E
Market Value of Equity
Currency ($)
Positive Value
D
Market Value of Debt
Currency ($)
Positive Value
Re
Cost of Equity
Percentage (%)
8% – 15%
Rd
Cost of Debt
Percentage (%)
3% – 10%
T
Corporate Tax Rate
Percentage (%)
15% – 30%
Key variables required to calculate weighted average cost of capital excel.
The term (1 – T) represents the "tax shield." Since interest payments on debt are generally tax-deductible, the effective cost of debt is lower than the nominal interest rate. This is a key reason why many companies utilize debt financing strategies.
Practical Examples: Calculate Weighted Average Cost of Capital Excel
Example 1: The Stable Manufacturer
Consider "FactoryCorp," a mature manufacturing firm. To calculate weighted average cost of capital excel for FactoryCorp, we gather the following data:
Equity (E): $10,000,000 (Market Capitalization)
Debt (D): $5,000,000 (Loans + Bonds)
Cost of Equity (Re): 9.0%
Cost of Debt (Rd): 6.0%
Tax Rate (T): 25%
Calculation:
Total Value (V) = $15,000,000.
Weight of Equity = 66.7%. Weight of Debt = 33.3%.
After-tax Cost of Debt = 6.0% × (1 – 0.25) = 4.5%. WACC = (0.667 × 9.0%) + (0.333 × 4.5%) = 6.0% + 1.5% = 7.5%.
FactoryCorp uses this 7.5% hurdle rate to evaluate new machinery purchases.
Example 2: The High-Growth Tech Startup
"TechNova" relies heavily on venture capital and has very little debt.
Equity (E): $2,000,000
Debt (D): $100,000
Cost of Equity (Re): 18.0% (Higher risk)
Cost of Debt (Rd): 8.0%
Tax Rate (T): 21%
When we calculate weighted average cost of capital excel for TechNova, the WACC is dominated by the cost of equity. The WACC is approximately 17.5%. This high rate reflects the riskiness of the startup; they need projects with very high returns to justify the investment.
How to Use This WACC Calculator
Our tool simplifies the process to calculate weighted average cost of capital excel without needing complex spreadsheets. Follow these steps:
Enter Market Values: Input the current market value of equity (market cap) and the market value of debt. Do not use book values if market values are available, as market values reflect the true economic claim.
Input Cost Rates: Enter your Cost of Equity (often derived from CAPM) and your pre-tax Cost of Debt (interest rate on loans).
Adjust Tax Rate: Input your effective corporate tax rate to account for the interest tax shield.
Analyze Results: The calculator updates in real-time. Use the "Copy Results" button to paste the data into your investment analysis reports.
A lower WACC indicates a cheaper cost of funding and generally leads to higher valuations in DCF models. Conversely, a higher WACC reduces the present value of future cash flows.
Key Factors That Affect WACC Results
When you calculate weighted average cost of capital excel, several macroeconomic and company-specific factors influence the final percentage:
Interest Rates: As central banks raise rates, the risk-free rate increases, driving up both the cost of debt and the cost of equity.
Market Risk Premium: If investors perceive the stock market as risky, they demand higher returns, increasing the cost of equity.
Capital Structure: Changing the ratio of debt to equity alters the weights. Adding debt usually lowers WACC initially due to the tax shield, but too much debt increases bankruptcy risk, raising the cost of debt.
Corporate Tax Policy: Higher tax rates increase the value of the tax shield, effectively lowering the after-tax cost of debt and the overall WACC.
Company Beta: A high Beta indicates high volatility relative to the market, which increases the Cost of Equity in the CAPM model.
Credit Rating: A downgrade in credit rating increases the interest rate lenders demand, raising the Cost of Debt.
Frequently Asked Questions (FAQ)
Why do we use market values instead of book values to calculate weighted average cost of capital excel?
Market values reflect the current economic reality and the actual price required to buy back the capital. Book values are historical and may not represent the true value of the company's assets or liabilities today.
How often should I recalculate WACC?
You should calculate weighted average cost of capital excel whenever there is a significant change in interest rates, the company's stock price, debt levels, or corporate tax rates. For active valuation models, quarterly updates are common.
Can WACC be too low?
Yes. While a low WACC suggests cheap capital, an artificially low WACC might indicate that the market is underpricing risk, or the company is taking on excessive cheap debt that could be dangerous in a downturn.
What is the difference between Cost of Equity and Cost of Debt?
Cost of Debt is the interest rate paid to lenders and is tax-deductible. Cost of Equity is the return expected by shareholders (dividends + capital appreciation) and is not tax-deductible. Equity is typically more expensive than debt due to higher risk.
How does WACC impact business valuation?
WACC is the "discount rate" in Discounted Cash Flow (DCF) analysis. A higher WACC lowers the present value of future cash flows, resulting in a lower business valuation. A lower WACC results in a higher valuation.
Is WACC the same as the hurdle rate?
Often, yes. Companies use WACC as the baseline "hurdle rate" that new projects must exceed to create value. If a project's return (ROIC) is lower than the WACC, the project destroys value.
What if a company has no debt?
If a company has zero debt, its WACC is simply equal to its Cost of Equity. The formula simplifies to just the equity portion since the debt weight is zero.
Where can I find the Cost of Equity?
It is not directly observable. You typically estimate it using the Capital Asset Pricing Model (CAPM): Risk-Free Rate + (Beta × Market Risk Premium).
Related Tools and Internal Resources
Enhance your financial analysis with these related calculators and guides:
Cost of Capital Calculator – A broader tool for estimating capital costs across different funding sources.