Debt & finance

Weighted average cost of capital (WACC) calculator

WACC is the minimum return a business must earn to satisfy everyone who funds it. In a valuation it becomes the discount rate, so a one-point change can move enterprise value by double digits.

Inputs

Result

WACC

18.19%

After-tax cost of debt
6.75%
Equity weight
75%
Debt weight
25%
Total capital
USD 4,000,000
Annual return required
USD 727,600
  • WACC is the discount rate in a DCF — test your valuation at plus and minus two points.

How to use this calculator

  1. 1Enter the market value of equity and total interest-bearing debt.
  2. 2Enter your cost of equity and the average interest rate on debt.
  3. 3Enter the company tax rate to get the after-tax debt cost.

How the weighting works

WACC = (E/V x cost of equity) + (D/V x cost of debt x (1 − tax rate)). Debt is cheaper than equity both because lenders rank ahead of owners and because interest is usually deductible.

That does not make more debt automatically better. Past a moderate gearing level, lenders raise rates and equity holders demand more for the added risk, so WACC turns back up.

Applying WACC to a private business

Use market values, not book values, for the equity weight. For a private company the equity value comes from your own valuation — iterate once if the result changes the weighting materially.

Small private businesses rarely have a WACC below 15%. Where an owner supplies both capital and labour, ensure the cost of equity reflects illiquidity and key-person risk.

Call this tool from the API

Every calculator on this site is also an endpoint. Get a free key from the developer page and call it from your product, spreadsheet or AI agent.

curl -X POST https://utopiavalue.co/api/v1/tools/wacc-calculator \
  -H "Authorization: Bearer $UTOPIA_API_KEY" \
  -H "Content-Type: application/json" \
  -d '{"equityValue":3000000,"debtValue":1000000,"costOfEquityPercent":22,"costOfDebtPercent":9,"taxRatePercent":25,"currency":"USD"}'

Frequently asked questions

Where do I get a cost of equity?

Use the CAPM calculator, then add a size and illiquidity premium for a private business — commonly 5-10 points.

Should I include leases as debt?

Yes, where they are finance leases or capitalised on the balance sheet. Ignoring them understates gearing and WACC.

Does WACC change with the deal structure?

Yes. A buyer funding with more debt has a lower WACC, which is one reason different bidders can justify different prices for the same business.