WACC Calculator
A project needs to earn more than 10.93% a year to add value for both lenders and owners. Use it as the discount rate in NPV.
How the WACC calculation works
Your weighted average cost of capital from the mix of debt and equity, their costs and your tax rate.
WACC = E/V × Re + D/V × Rd × (1 − T)
E and D are the values of equity and debt, V = E + D, Re and Rd their costs and T the tax rate.
Weight each source by its share of total capital
$600,000 of equity and $400,000 of debt gives weights of 60% and 40%.
Interest is tax-deductible, so debt costs less after tax
An 8% loan at a 21% tax rate costs 8% × 0.79 = 6.32%.
Add the two shares together
60% × 14% = 8.40% plus 40% × 6.32% = 2.53% gives a WACC of 10.93%.
Worked example. A company with $600,000 of equity at a 14% expected return and $400,000 of bank debt at 8%, taxed at 21%, has a WACC of 10.93%. New equipment or a new location should return more than that to be worth funding.
WACC FAQ
What is the WACC formula?
WACC = (E ÷ V) × Re + (D ÷ V) × Rd × (1 − T), where E is equity, D is debt, V = E + D, Re the cost of equity, Rd the cost of debt and T the tax rate.
How do I find the cost of debt for WACC?
Cost of debt = yearly interest ÷ average interest-bearing debt. $32,000 of interest on $400,000 of loans is 8%. Because interest is deductible, the after-tax cost of debt = Rd × (1 − T), so 8% × (1 − 21%) = 6.32%.
How do I estimate the cost of equity for a small business?
Public companies often use CAPM: cost of equity = risk-free rate + beta × equity risk premium. NYU Stern data for January 2026 puts the average for US listed companies at 8.02%. A small private business is riskier and harder to sell, so owners usually pick a higher return than that, and above their loan rate.
What is a good WACC?
Lower is cheaper, and a good WACC is one below the return your projects earn. NYU Stern data for January 2026 puts the average for US listed companies at 6.96%, from 4.36% for general utilities to 9.34% for software. Small private firms usually land higher because both their equity and their loans cost more.
What is WACC used for?
It is the minimum return an investment must earn to satisfy lenders and owners. It is commonly used as the discount rate in NPV and present value calculations.
How do I calculate WACC in Excel?
With equity in B1, debt in B2, cost of equity in B3, cost of debt in B4 and tax rate in B5: =B1/(B1+B2)*B3 + B2/(B1+B2)*B4*(1-B5). Enter the rates as percentages (14%) or decimals (0.14).
Sources: IRS Publication 542: Corporations (tax rate) · NYU Stern (Damodaran): Cost of capital by sector (US), January 2026