WACC Calculator
WACC
Calculate weighted average cost of capital
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WACC with Preferred Stock
Include preferred stock in WACC calculation
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Formula
WACC = (E/V) * Re + (D/V) * Rd * (1 - Tc)
Frequently Asked Questions
What is WACC?
WACC (Weighted Average Cost of Capital) represents the average rate a company pays to finance its assets. It blends the cost of equity and the after-tax cost of debt, weighted by their proportions in the capital structure.
Why is WACC important?
WACC is used as a discount rate in DCF (Discounted Cash Flow) analysis. Projects must earn returns above the WACC to create shareholder value. It represents the minimum acceptable return for investors.
Why do we use after-tax cost of debt?
Interest on debt is tax-deductible, so the effective cost of debt is reduced by the tax shield. After-tax cost of debt = pre-tax cost of debt x (1 - tax rate).
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