  # Weighted Avg Cost of Capital(WACC) Calculator

This wacc calculator is used to finds the weighted average cost of capital for any types of firm based on debt, equity and tax rate.

# Results...

WACC = [ E(D + E) × Re ] + [ D(D + E) × Rd × (1 - Tc) ]

WACC = [ 95(110 + 95) × 0.14 ] + [ 110(110 + 95) × 0.02 × (1 - 0.5) ]

WACC = [ 95205 × 0.14 ] + [ 110205 × 0.02 × 0.5 ]

WACC = [ 0.463 × 0.14 ] + [ 0.537 × 0.02 × 0.5 ]

WACC = [ 0.063 + 0.005 ]

WACC = 0.06793 or 6.79% ## Formula for Weighted Avg Cost of Capital(WACC) :

The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. It is commonly referred to as the company cost of capital. Importantly, it is dictated by the external market and not by management.the WACC can be calculated with the following formula.

WACC = [ E(D + E) × Re ] + [ D(D + E) × Rd × (1 - Tc) ]

Where,

WACC  - weighted average cost of capital

Re  - Cost of equity

Rd  - Cost of debt

D - Market value of the company debt

E - Market value of the company equity

D + E - Total market value of the company financing (debt and equity)

E(D + E) - Percentage of equity financing.

D(D + E) - Percentage of debt financing.

Tc  - Corporate tax rate.

Example :

Debt (D) = \$3000

Equity (E) = \$9000

Rd = 7%

Re = 11.5%

Corporate Tax Rate (Tc) = 15%

In above example, the WACC would be calculated as follows:

WACC = [ 9000(3000 + 9000) × 0.12 ] + [ 3000(3000 + 9000) × 0.07 × (1 - 0.15) ]

WACC = [ 900012000 × 0.12 ] + [ 300012000 × 0.07 × 0.85 ]

WACC = [ 0.75 × 0.12 ] + [ 0.25 × 0.07 × 0.85 ]

WACC = [ 0.086 + 0.015 ]

WACC = 0.10113 or 10.11% 