WACC Calculator

💡 WACC: The Foundation of Discounted Cash Flow Valuation

WACC (Weighted Average Cost of Capital) represents the blended cost of financing a company's operations through both debt and equity. It is the discount rate used in Discounted Cash Flow (DCF) models — the most rigorous method for intrinsic valuation of businesses and projects.

The formula is: WACC = (E/V × Re) + (D/V × Rd × (1−T)), where E = equity value, D = debt value, V = total value (E+D), Re = cost of equity, Rd = cost of debt, and T = corporate tax rate. The tax shield on debt (1−T factor) reflects that interest payments are tax-deductible, making debt inherently cheaper than equity on an after-tax basis.