Weighted Average Cost of Capital (WACC) Calculator
Welcome to the WACC Calculator! This tool helps you determine the Weighted Average Cost of Capital — a key financial metric used to evaluate investment and project decisions. It represents the minimum return a company must earn to satisfy its investors (both equity and debt holders).
📘 Field Explanations
- Cost of Equity (Re %): The return expected by shareholders or equity investors. For example, if investors expect a 12% return, Re = 12.
- Cost of Debt (Rd %): The effective interest rate a company pays on its borrowed funds (e.g., 8%).
- Market Value of Equity (E): The total market value of ownership capital (shareholders’ investment).
- Market Value of Debt (D): The total market value of company debt (loans, bonds, etc.).
- Corporate Tax Rate (Tc %): The income tax rate applicable to the company’s profit, since interest on debt is tax deductible.
🧮 Calculate WACC
📊 Interpretation of WACC
The WACC represents the company’s average cost of financing (equity and debt). It is often used as a discount rate for project evaluation. If a project’s expected return exceeds the WACC, it adds value to the firm and should generally be accepted. Conversely, if the return is below the WACC, it destroys shareholder value.