Enter the cost of equity (%), the total equity, cost of debt (%), total debt, and corporate tax rate (%) into the WACC Calculator below. The WACC calculator provides a rate that a company must pay on average to all of it’s securities to finance it’s assets.
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The formula used by the WAAC Calculator above is as follows:
- Where rE is the cost of equity (%)
- E is the total equity
- rD is the cost of debt (%)
- D is the total debt
- t is the corporate tax rate.
The weight average cost of equity is a key term that needs to be understood when running a business. Often times business finance new operations through selling securities. These securities have a cost associated with them. This cost is considered the debt and debt rate.
How to Calculate WACC
We will now go over an example of how to calculate WACC using the calculator above.
First, you must determine the total rate of the cost of your equity. This is typically considered the rate of your equity. Let’s assume it is 10% for this example.
Next you need to determine your total equity. This is the total value of all of your assets. Let’s say this is $10,000,000.00.
Next, the rate of the debt your raised to purchase that equity needs to be determined. The goal is that this rate will be less than the rate of your equity, or else the funding likely wasn’t worth the cost.
Finally, you need to add up the total cost of debt, and determine the corporate tax rate. We will assume it’s $5,000,000.00 and 4%. Plug all the values into the calculator above, and you have your WACC in %.