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WACC Calculator
Calculate the weighted average cost of capital for any company. Enter a ticker to auto-populate market cap, debt, and beta — or input your own assumptions. Use the result as your discount rate in a DCF model.
Inputs
Cost of Equity (CAPM)
Cost of equity (CAPM): 9.75% = 4.25% + 1× × 5.5%
Cost of Debt & Tax
Results
Enter market cap and debt to see WACC
Load a ticker for live data, or enter values manually. Results update instantly.
How to use this WACC calculator
Load a ticker or enter values manually
Type any US-listed ticker and click Load to auto-populate market cap, total debt, beta, and interest expense from live market data. Or enter your own assumptions for a custom capital structure analysis.
Review cost of equity via CAPM
Cost of equity = risk-free rate + beta x equity risk premium. Higher beta means higher cost of equity. The calculator uses the 10-year Treasury yield and a 5.5% equity risk premium as defaults.
Check cost of debt and tax rate
Cost of debt is estimated from interest expense / total debt. The tax shield reduces the effective cost. Verify the tax rate matches the company's effective rate from recent filings — it can differ significantly from the statutory 21%.
Use WACC as your DCF discount rate
The final WACC blends cost of equity and after-tax cost of debt by capital structure weights. Use this as the discount rate in your DCF model. Compare to sector benchmarks below — if your WACC is far outside the range, double-check inputs.
Understanding WACC
The discount rate that drives every DCF
WACC — weighted average cost of capital — is the blended rate a company pays to finance its operations through debt and equity. It answers a simple question: what minimum return must this business generate to satisfy everyone who funded it? Creditors want their interest. Shareholders want a return that compensates for the risk of owning equity instead of a Treasury bond. WACC combines both into a single number.
In a discounted cash flow model, WACC is the discount rate applied to projected free cash flows. A higher WACC means future cash flows are worth less today, producing a lower intrinsic value. A 1-percentage-point change in WACC can swing a stock's fair value by 10-20%, making it one of the most sensitive — and most debated — inputs in any valuation.
Cost of equity: what shareholders demand
Cost of equity is the return shareholders require to compensate for the risk of owning the stock instead of a risk-free asset. The Capital Asset Pricing Model (CAPM) estimates it as: Cost of Equity = Risk-Free Rate + Beta x Equity Risk Premium. The risk-free rate is typically the 10-year Treasury yield (~4.5%). The equity risk premium (ERP) is the additional return investors demand over Treasuries — historically 4.5-6% for US equities.
Beta measures a stock's sensitivity to market movements. A beta of 1.0 means the stock moves in line with the S&P 500. Above 1.0 means more volatile (higher cost of equity); below 1.0 means less volatile (lower cost of equity). Utilities often have betas of 0.4-0.6; tech stocks often have betas of 1.2-1.8. CAPM isn't perfect — it assumes markets are efficient and ignores company-specific risk — but it's the industry standard starting point.
Cost of debt: cheaper than equity, with a tax shield
Debt is almost always cheaper than equity because lenders have priority in bankruptcy and receive contractual interest payments regardless of business performance. The pre-tax cost of debt is the average interest rate a company pays on its borrowings. The effective (after-tax) cost is lower because interest payments are tax-deductible: After-Tax Cost of Debt = Pre-Tax Rate x (1 - Tax Rate).
At a 21% corporate tax rate, 5% pre-tax debt costs only 3.95% after tax. This tax shield is why companies use some debt — it lowers WACC and can increase equity returns. But the benefit has limits: too much debt raises bankruptcy risk, which increases both the cost of debt (credit spreads widen) and the cost of equity (beta rises). The optimal capital structure balances the tax shield against financial distress costs.
Capital structure: the debt-equity mix
Capital structure weights determine how much each cost component matters. A company funded 80% by equity and 20% by debt will have a WACC dominated by the cost of equity. A utility funded 50/50 will get a significant benefit from the cheaper debt component. The weights should use market values, not book values — market cap for equity, and market value of debt (which approximates book value for most investment-grade issuers).
Watch for companies with rapidly changing capital structures. A company that just completed a large acquisition funded by debt may have temporarily elevated leverage. Conversely, a company aggressively paying down debt will see its WACC shift over time. Use the current capital structure for a point-in-time WACC, and a target or normalized structure for a forward-looking estimate.
ROIC vs WACC: the value creation test
WACC is the hurdle rate. If a company's return on invested capital (ROIC) exceeds WACC, every dollar reinvested in the business creates value. If ROIC falls below WACC, growth actually destroys value — the company earns less than its cost of capital on each incremental investment. This is the single most important concept in corporate finance.
A company growing revenue at 20%/year with ROIC of 7% and WACC of 10% is destroying value with every dollar of growth. Conversely, a slow-growth company earning 25% ROIC against an 8% WACC creates enormous value because every retained dollar compounds at a high spread. The ROIC-WACC spread, not revenue growth, determines whether a business is truly worth more as it grows.
Common WACC mistakes to avoid
The most common mistake is using book value weights instead of market value weights. A company with $10B book equity but $50B market cap has very different capital structure weights depending on which you use. Always use market cap for equity weight.
Other pitfalls: using the statutory tax rate (21%) instead of the effective tax rate (which may be higher or lower due to foreign operations, tax credits, or deferred taxes); applying the same beta from five years ago without checking if the business has changed; and using WACC for projects with materially different risk profiles than the company overall. A utility company's WACC shouldn't be used to evaluate a speculative venture investment — each project needs a risk-appropriate discount rate.
WACC by Sector — Benchmarks
| Sector | Typical WACC Range |
|---|---|
| Technology | 9–11% |
| Utilities | 5–7% |
| Healthcare | 8–10% |
| Financials | 7–9% |
| Consumer Discretionary | 8–10% |
| Consumer Staples | 6–8% |
| Industrials | 7–9% |
| Energy | 8–11% |
| Real Estate | 6–8% |
| Materials | 8–10% |
Frequently asked questions
What is WACC?
WACC (weighted average cost of capital) is the blended rate a company pays to finance its operations through both debt and equity. It represents the minimum return a company must earn on its existing assets to satisfy its creditors, owners, and other providers of capital. WACC is used as the discount rate in DCF (discounted cash flow) analysis.
How do you calculate WACC?
WACC = (E/V × Re) + (D/V × Rd × (1 − T)), where E = market cap (equity value), D = total debt, V = E + D (total firm value), Re = cost of equity, Rd = cost of debt, and T = corporate tax rate. Cost of equity is typically calculated using CAPM: Re = risk-free rate + beta × equity risk premium.
What is a good WACC?
WACC varies by sector and company risk profile. Utilities typically have WACC of 5–7% due to stable cash flows and cheap debt. Technology companies often see 9–11% due to higher equity betas. A 'good' WACC for valuation purposes is one that accurately reflects the company's risk — not one that's simply low. Using too low a discount rate inflates intrinsic value and creates false margin of safety.
Why does WACC matter for stock valuation?
WACC is the discount rate in DCF models. A higher WACC means future cash flows are worth less today, producing a lower intrinsic value. A 1% change in WACC can swing intrinsic value by 10–20%, making it one of the most sensitive inputs in any valuation. Getting WACC right is critical — an optimistic discount rate will make any stock look cheap.
How does WACC affect DCF valuation?
WACC is used to discount projected free cash flows back to present value. Lower WACC = higher present value = higher intrinsic value per share. WACC also appears in the terminal value formula (Gordon Growth Model): Terminal Value = FCF × (1 + g) / (WACC − g). Since terminal value often represents 60–80% of total DCF value, even small changes in WACC have an outsized impact on the final number.
What is the WACC formula?
WACC = (E/V × Re) + (D/V × Rd × (1 − T)). E = market cap (equity value), D = total debt, V = E + D (total firm value), Re = cost of equity (estimated via CAPM), Rd = pre-tax cost of debt, and T = corporate tax rate. The formula weights each capital source by its proportion of total firm value, creating a blended required return.
What is CAPM and how does it estimate cost of equity?
CAPM (Capital Asset Pricing Model) estimates cost of equity as: Re = Risk-Free Rate + Beta × Equity Risk Premium. The risk-free rate is typically the 10-year Treasury yield (~4.5%). Beta measures a stock's volatility relative to the market — a beta of 1.2 means the stock is 20% more volatile than the S&P 500. The equity risk premium (4.5–6%) is the additional return investors demand for holding stocks over risk-free bonds.
Should I use book value or market value weights for WACC?
Always use market values. WACC represents the cost of capital at today's market prices, not historical accounting values. For equity, use current market capitalization. For debt, market value often approximates book value for investment-grade issuers, but for distressed companies or those with traded bonds, use the market price of the debt. Using book value weights can significantly misstate WACC, especially for companies where market cap has diverged from book equity.