WACC Calculator
Calculate weighted average cost of capital with integrated CAPM and sensitivity testing.
Frequently asked questions
What is WACC used for?
Weighted Average Cost of Capital is the discount rate used in DCF valuation to translate a company's projected future cash flows into present value. It represents the blended required return of the firm's debt and equity holders, weighted by capital structure.
How is WACC calculated?
WACC = (E/V × Re) + (D/V × Rd × (1 − Tax Rate)), where E is market equity, D is debt, V is total capital (E + D), Re is cost of equity (typically from CAPM), and Rd is cost of debt. The (1 − Tax Rate) term captures the tax shield on interest.
What is CAPM and how does it feed into WACC?
The Capital Asset Pricing Model estimates cost of equity as Re = Rf + β × (Rm − Rf), where Rf is the risk-free rate, β is the stock's market beta, and (Rm − Rf) is the equity risk premium. This calculator includes an integrated CAPM block that flows directly into WACC.