What does a WACC of 9.00% mean?
On the defaults — $600,000 of equity at a 12% cost of equity and $400,000 of debt at a 6% cost of debt after a 25% tax rate — the weighted average cost of capital is 9.00%, which is below the 12.00% cost of equity — the debt is cheaper than the equity, so the 40.00% of debt pulls the average down. The WACC is the average rate the company pays to finance its assets: every dollar of new investment must earn at least 9.00% to cover what the shareholders and the lenders demand. A project earning above 9.00% creates value; one earning below it destroys value; and one earning exactly 9.00% breaks even.
Three things about the model are worth stating plainly.
First, the arithmetic is 60.00% × 12% + 40.00% × 4.50% = 9.00% — the equity component is 7.20 points and the debt component is 1.80 points, and the WACC, the weights and the components are three outputs, never the same number. Second, the meaning is 9.00% a year on every dollar of capital — the rate the company must earn to satisfy everyone who funded it, not the rate any one source charges. And third, the WACC is displayed to two decimals, half-up, and a figure that displays as 10.00% can sit a hair above or below 10%: a 13.67% cost of equity gives a WACC of 10.002000%, which displays as 10.00% — and a 13.66% cost of equity gives 9.996000%, which also displays as 10.00% — all listed in Accuracy & limitations.
The worked example, line by line
Setup: market value of equity $600,000, market value of debt $400,000, cost of equity 12%, cost of debt 6%, tax rate 25%.
Line 1 — the total capital. $600,000 + $400,000 = $1,000,000.
Line 2 — the weight of equity. $600,000 ÷ $1,000,000 = 60.00%.
Line 3 — the weight of debt. $400,000 ÷ $1,000,000 = 40.00%.
Line 4 — the after-tax cost of debt. 6% × (1 − 25%) = 4.50% — the interest is tax-deductible, so the debt costs less than 6% after tax.
Line 5 — the equity component. 60.00% × 12% = 7.20%.
Line 6 — the debt component. 40.00% × 4.50% = 1.80%.
Line 7 — the WACC. 7.20% + 1.80% = 9.00%.
Line 8 — the check. At a 13.67% cost of equity the WACC is 10.002000% — above 10%; and at 13.66% it is 9.996000% — below 10%.
Every branch, checked
Equity $800,000: equity $800,000.00 (66.67%); debt $400,000.00 (33.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 9.50% — More of the dearer source, so a higher average cost of capital.
Equity $400,000: equity $400,000.00 (50.00%); debt $400,000.00 (50.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.25% — Less of the dearer source, so a lower average cost of capital.
Cost of equity 15%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 15.00%; after-tax cost of debt 4.50%; WACC 10.80% — A higher return demanded by shareholders, so a higher average cost of capital.
Cost of equity 9%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 9.00%; after-tax cost of debt 4.50%; WACC 7.20% — A lower return demanded by shareholders, so a lower average cost of capital.
Cost of debt 8%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 6.00%; WACC 9.60% — Dearrer debt, so a higher average cost of capital — the after-tax cost rises to 6.00%.
Cost of debt 4%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 3.00%; WACC 8.40% — Cheaper debt, so a lower average cost of capital — the after-tax cost falls to 3.00%.
Tax 35%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 3.90%; WACC 8.76% — More of the interest is deductible, so a lower average cost of capital — the after-tax cost falls to 3.90%.
Tax 0%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 6.00%; WACC 9.60% — No tax shield at all, so a higher average cost of capital — the after-tax cost is the full 6.00%.
The reverses, worked backwards
Smallest cost of equity for the WACC to STAY at or above 10%: At the displayed 13.67% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 13.67%; after-tax cost of debt 4.50%; WACC 10.00% (unrounded 10.002000%). At the lower neighbor the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 13.66%; after-tax cost of debt 4.50%; WACC 10.00% (unrounded 9.996000%) — below 10% — so 13.67% is the smallest cost of equity for the WACC to STAY at or above 10%.
Smallest cost of debt for the WACC to STAY at or above 10%: At the displayed 9.34% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 7.01%; WACC 10.00% (unrounded 10.002000%). At the lower neighbor the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 7.00%; WACC 10.00% (unrounded 9.999000%) — below 10% — so 9.34% is the smallest cost of debt for the WACC to STAY at or above 10%.
Largest debt for the WACC to STAY at or above 8.5%: At the displayed $525,000 the figures are equity $600,000.00 (53.33% — unrounded 53.333333%); debt $525,000.00 (46.67%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.50% (unrounded 8.500000%). At the upper neighbor the figures are equity $600,000.00 (53.33% — unrounded 53.333286%); debt $525,001.00 (46.67%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.50% (unrounded 8.499996%) — below 8.5% — so $525,000 is the largest debt for the WACC to STAY at or above 8.5%.
Largest tax rate for the WACC to STAY at or above 9.30%: At the displayed 12.50% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 5.25%; WACC 9.30% (unrounded 9.300000%). At the upper neighbor the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 5.25%; WACC 9.30% (unrounded 9.299760%) — below 9.30% — so 12.50% is the largest tax rate for the WACC to STAY at or above 9.30%.
Smallest cost of debt for the WACC to STAY at or above 12%: At the displayed 16.00% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 12.00%; WACC 12.00% (unrounded 12.000000%). At the lower neighbor the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 11.99%; WACC 12.00% (unrounded 11.997000%) — below 12% — so 16.00% is the smallest cost of debt for the WACC to STAY at or above 12%.
Largest equity for the WACC to STAY at or above 8%: At the displayed $350,000 the figures are equity $350,000.00 (46.67% — unrounded 46.666667%); debt $400,000.00 (53.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.00% (unrounded 8.000000%). At the lower neighbor the figures are equity $349,999.00 (46.67% — unrounded 46.666596%); debt $400,000.00 (53.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.00% (unrounded 7.999995%) — below 8% — so $350,000 is the largest equity for the WACC to STAY at or above 8%.
A warning about the neighbours: every neighbour above sits one dollar, one hundredth of a percent or one cent from the star, and every neighbour figure is a hair below or above the target even though it displays as the target — a one-hundredth move in the cost of equity moves the WACC by only 0.006 points, so the displayed two-decimal figure cannot tell the star from its neighbour. The page prints the unrounded six-decimal WACC in full so the rounding does not mislead you: R1 10.002000% / 9.996000%; R2 10.002000% / 9.999000%; R3 8.500000% / 8.499996%; R4 9.300000% / 9.299760%; R5 12.000000% / 11.997000%; R6 8.000000% / 7.999995%. The R1 neighbour sits a hair below 10% while displaying as 10.00%, and the R6 neighbour sits a hair below 8% while displaying as 8.00%.
What the defaults assume
The defaults are $600,000 of equity, $400,000 of debt, a 12% cost of equity, a 6% cost of debt and a 25% tax rate — equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 9.00%. With Equity $800,000, equity $800,000.00 (66.67%); debt $400,000.00 (33.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 9.50%. With Equity $400,000, equity $400,000.00 (50.00%); debt $400,000.00 (50.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.25%. With Cost of equity 15%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 15.00%; after-tax cost of debt 4.50%; WACC 10.80%. With Cost of equity 9%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 9.00%; after-tax cost of debt 4.50%; WACC 7.20%. With Cost of debt 8%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 6.00%; WACC 9.60%. With Cost of debt 4%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 3.00%; WACC 8.40%. With Tax 35%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 3.90%; WACC 8.76%. With Tax 0%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 6.00%; WACC 9.60%. With Debt $0, equity $600,000.00 (100.00%); debt $0.00 (0.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 12.00% — all equity — the WACC is the cost of equity, 12.00%. With Equity $0, equity $0.00 (0.00%); debt $400,000.00 (100.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 4.50% — all debt — the WACC is the after-tax cost of debt, 4.50%. With Equity $987,654.32, debt $456,789.10, cost of equity 11.37%, cost of debt 5.83%, tax 21.5% (WACC unrounded 9.221647%, weight of equity unrounded 0.683761), equity $987,654.32 (68.38% — unrounded 68.376117%); debt $456,789.10 (31.62%); cost of equity 11.37%; after-tax cost of debt 4.58%; WACC 9.22% (unrounded 9.221647%) — the unrounded WACC and weight round to the displayed figures. With Equity $10,000,000, debt $6,000,000, equity $10,000,000.00 (62.50%); debt $6,000,000.00 (37.50%); cost of equity 14.00%; after-tax cost of debt 4.90%; WACC 10.59% (unrounded 10.587500%) — the same rate at a much bigger size — scale does not change the WACC. With Tax 100%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 0.00%; WACC 7.20% — the interest is fully deductible, so the debt costs nothing after tax. With Cost of equity 0%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 0.00%; after-tax cost of debt 4.50%; WACC 1.80% — the shareholders demand nothing, so only the debt component counts. With Cost of debt 0%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 0.00%; WACC 7.20% — the lenders charge nothing, so only the equity component counts. With Equity = debt, equity $500,000.00 (50.00%); debt $500,000.00 (50.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.25% — half equity, half debt — the WACC sits halfway between the two costs. With Equity $1, debt $1, equity $1.00 (50.00%); debt $1.00 (50.00%); cost of equity 10.00%; after-tax cost of debt 4.00%; WACC 7.00% — a dollar of each — the smallest capital base that still has a WACC. With Cost of equity -2%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity −2.00%; after-tax cost of debt 4.50%; WACC 0.60% — a negative cost of equity — the equity component is a real figure, shown with the U+2212 minus sign. With Cost of equity 25%, cost of debt 12%, tax 40%, equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 25.00%; after-tax cost of debt 7.20%; WACC 17.88% — a hot company — dear equity and dear debt at a high tax rate.
A note on the rounding: the WACC is displayed to two decimals, half-up. With the fractional inputs the unrounded WACC is 9.221647% — it displays as 9.22% — and the unrounded weight of equity is 0.683761 — it displays as 68.38% — and the unrounded after-tax cost of debt is 4.576550% — it displays as 4.58%. With the big inputs the unrounded WACC is 10.587500% — it displays as 10.59% — and the debt component is 1.84%. At a −2% cost of equity the equity component is −1.20 points — it displays as −1.20% — and the WACC is 0.60%. The page prints the unrounded values so the rounding does not mislead you.
Output · formula · meaning
| Output | Formula | What it means |
|---|
| Market value of equity | input | $600,000.00. |
| Market value of debt | input | $400,000.00. |
| Cost of equity | input | 12.00%. |
| Cost of debt | input | 6.00%. |
| Tax rate | input | 25.00%. |
| Weight of equity | equity ÷ (equity + debt) | 60.00%. |
| Weight of debt | debt ÷ (equity + debt) | 40.00%. |
| After-tax cost of debt | cost of debt × (1 − tax rate) | 4.50%. |
| Equity component | weight of equity × cost of equity | 7.20%. |
| Debt component | weight of debt × after-tax cost of debt | 1.80%. |
| WACC | equity component + debt component | 9.00%. |
| Verdict | whether the WACC sits below the cost of equity | WACC 9.00% — 7.20 points from equity, 1.80 points from debt; below the 12.00% cost of equity. |
| Reverse: Smallest cost of equity for the WACC to STAY at or above 10% | step | 13.67%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 13.67%; after-tax cost of debt 4.50%; WACC 10.00% (unrounded 10.002000%). |
| Reverse: Smallest cost of debt for the WACC to STAY at or above 10% | step | 9.34%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 7.01%; WACC 10.00% (unrounded 10.002000%). |
| Reverse: Largest debt for the WACC to STAY at or above 8.5% | step | $525,000: equity $600,000.00 (53.33% — unrounded 53.333333%); debt $525,000.00 (46.67%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.50% (unrounded 8.500000%). |
| Reverse: Largest tax rate for the WACC to STAY at or above 9.30% | step | 12.50%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 5.25%; WACC 9.30% (unrounded 9.300000%). |
| Reverse: Smallest cost of debt for the WACC to STAY at or above 12% | step | 16.00%: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 12.00%; WACC 12.00% (unrounded 12.000000%). |
| Reverse: Largest equity for the WACC to STAY at or above 8% | step | $350,000: equity $350,000.00 (46.67% — unrounded 46.666667%); debt $400,000.00 (53.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.00% (unrounded 8.000000%). |
| Equity $800,000 | same model | equity $800,000.00 (66.67%); debt $400,000.00 (33.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 9.50%. |
| Equity $400,000 | same model | equity $400,000.00 (50.00%); debt $400,000.00 (50.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.25%. |
| Cost of equity 15% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 15.00%; after-tax cost of debt 4.50%; WACC 10.80%. |
| Cost of equity 9% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 9.00%; after-tax cost of debt 4.50%; WACC 7.20%. |
| Cost of debt 8% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 6.00%; WACC 9.60%. |
| Cost of debt 4% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 3.00%; WACC 8.40%. |
| Tax 35% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 3.90%; WACC 8.76%. |
| Tax 0% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 6.00%; WACC 9.60%. |
| Debt $0 | same model | equity $600,000.00 (100.00%); debt $0.00 (0.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 12.00%. |
| Equity $0 | same model | equity $0.00 (0.00%); debt $400,000.00 (100.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 4.50%. |
| Equity $987,654.32, debt $456,789.10, cost of equity 11.37%, cost of debt 5.83%, tax 21.5% (WACC unrounded 9.221647%, weight of equity unrounded 0.683761) | same model | equity $987,654.32 (68.38% — unrounded 68.376117%); debt $456,789.10 (31.62%); cost of equity 11.37%; after-tax cost of debt 4.58%; WACC 9.22% (unrounded 9.221647%). |
| Equity $10,000,000, debt $6,000,000 | same model | equity $10,000,000.00 (62.50%); debt $6,000,000.00 (37.50%); cost of equity 14.00%; after-tax cost of debt 4.90%; WACC 10.59% (unrounded 10.587500%). |
| Tax 100% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 0.00%; WACC 7.20%. |
| Cost of equity 0% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 0.00%; after-tax cost of debt 4.50%; WACC 1.80%. |
| Cost of debt 0% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 0.00%; WACC 7.20%. |
| Equity = debt | same model | equity $500,000.00 (50.00%); debt $500,000.00 (50.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.25%. |
| Equity $1, debt $1 | same model | equity $1.00 (50.00%); debt $1.00 (50.00%); cost of equity 10.00%; after-tax cost of debt 4.00%; WACC 7.00%. |
| Cost of equity -2% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity −2.00%; after-tax cost of debt 4.50%; WACC 0.60%. |
| Cost of equity 25%, cost of debt 12%, tax 40% | same model | equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 25.00%; after-tax cost of debt 7.20%; WACC 17.88%. |
Who uses this
- The finance manager pricing a new project: they learn the company’s WACC is 9.00% — and they check the 13.67% reverse to see the cost of equity that would push it to 10%.
- The small-business owner choosing between a loan and new shares: they learn $400,000 of debt at 6% costs 4.50% after tax — and they check the $525,000 reverse to see the most debt that keeps the WACC at or above 8.5%.
- The investor valuing a company: they learn the WACC is 9.00% — and they check the 12.50% reverse to see the tax rate that would pull it to 9.30%.
- The student learning corporate finance: they learn the WACC is the weighted average of the cost of equity and the after-tax cost of debt — and they check the $350,000 reverse to see the most equity that keeps the WACC at or above 8%.
Accuracy & limitations
The math is first-principles: the weighted average cost of capital is the weight of equity times the cost of equity plus the weight of debt times the after-tax cost of debt, where the weights are the market values divided by the total capital and the after-tax cost of debt is the cost of debt times one minus the tax rate — all in dollars and percent, the WACC displayed to two decimals half-up. There IS division in this calculator — the weights divide by the total capital, so the formula as written is undefined when equity and debt are both zero — the calculator says so plainly: at $0 of equity and $0 of debt there is no capital to weight, so the WACC is undefined. At $0 of debt the WACC is the cost of equity — 12.00% — and at $0 of equity the WACC is the after-tax cost of debt — 4.50%. At a 100% tax rate the after-tax cost of debt is 0.00% — the interest is fully deductible — and the WACC is 7.20%. At a −2% cost of equity the equity component is −1.20 points — a real figure, shown with the U+2212 minus sign — and the WACC is 0.60%. With the fractional inputs the unrounded WACC is 9.221647% — it displays as 9.22% — and the unrounded weight of equity is 0.683761 — it displays as 68.38%. The smallest cost of equity for the WACC to stay at or above 10% is 13.67% — the page shows the displayed 13.67% input only, and the forward at that input is 10.002000%, which displays as 10.00%. The largest debt for the WACC to stay at or above 8.5% is $525,000 — the page shows the displayed $525,000 input only, and the forward at that input is 8.500000%, which displays as 8.50%. What the model cannot do is say whether 9.00% is a good cost of capital: it says nothing about the risk — whether the cost of equity is estimated right — and it says nothing about the capital structure — a company with 40% debt and a company with 80% debt have very different risks at the same WACC. Use it to see the rate — then check the net present value, internal rate of return and payback period calculators before you decide the investment is right.
Cite this calculatorBright Side Kit. “Weighted Average Cost of Capital (WACC) Calculator.” brightoolbox.com, 2026. Method: weighted average cost of capital = (market value of equity ÷ total capital) × cost of equity + (market value of debt ÷ total capital) × cost of debt × (1 − tax rate). Reverses: smallest cost of equity for the WACC to STAY at or above 10% is 13.67% (at 13.67% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 13.67%; after-tax cost of debt 4.50%; WACC 10.00% (unrounded 10.002000%); at 13.66% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 13.66%; after-tax cost of debt 4.50%; WACC 10.00% (unrounded 9.996000%) — below 10%); smallest cost of debt for the WACC to STAY at or above 10% is 9.34% (at 9.34% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 7.01%; WACC 10.00% (unrounded 10.002000%); at 9.33% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 7.00%; WACC 10.00% (unrounded 9.999000%) — below 10%); largest debt for the WACC to STAY at or above 8.5% is $525,000 (at $525,000 the figures are equity $600,000.00 (53.33% — unrounded 53.333333%); debt $525,000.00 (46.67%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.50% (unrounded 8.500000%); at $525,001 the figures are equity $600,000.00 (53.33% — unrounded 53.333286%); debt $525,001.00 (46.67%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.50% (unrounded 8.499996%) — below 8.5%); largest tax rate for the WACC to STAY at or above 9.30% is 12.50% (at 12.50% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 5.25%; WACC 9.30% (unrounded 9.300000%); at 12.51% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 5.25%; WACC 9.30% (unrounded 9.299760%) — below 9.30%); smallest cost of debt for the WACC to STAY at or above 12% is 16.00% (at 16.00% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 12.00%; WACC 12.00% (unrounded 12.000000%); at 15.99% the figures are equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 11.99%; WACC 12.00% (unrounded 11.997000%) — below 12%); largest equity for the WACC to STAY at or above 8% is $350,000 (at $350,000 the figures are equity $350,000.00 (46.67% — unrounded 46.666667%); debt $400,000.00 (53.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.00% (unrounded 8.000000%); at $349,999 the figures are equity $349,999.00 (46.67% — unrounded 46.666596%); debt $400,000.00 (53.33%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 8.00% (unrounded 7.999995%) — below 8%). Defaults: equity $600,000.00 (60.00%); debt $400,000.00 (40.00%); cost of equity 12.00%; after-tax cost of debt 4.50%; WACC 9.00% Bright Side Kit. "Weighted Average Cost of Capital (WACC) Calculator." https://brightoolbox.com/weighted-average-cost-of-capital-calculator/ Accessed October 27, 2026.
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Frequently asked questions
What is the weighted average cost of capital?
The average rate a company pays to finance its assets, weighted by how much of each source it uses. On $600,000 of equity at 12% and $400,000 of debt at 6% after 25% tax, the WACC is 9.00% — 7.20 points from equity and 1.80 points from debt.
How do I calculate WACC?
Weight each cost by its share of the capital and add them. The weight of equity is $600,000 ÷ $1,000,000 = 60.00% and the weight of debt is 40.00%. The after-tax cost of debt is 6% × (1 − 25%) = 4.50%. So the WACC is 60.00% × 12% + 40.00% × 4.50% = 9.00%.
What is a good WACC?
Lower is cheaper — but only for the same risk. A WACC of 9.00% means every dollar of new investment must earn at least 9.00% to cover what the shareholders and the lenders demand. Compare it against the return of the project, not against other companies with different risks.
Why is the cost of debt after tax?
Interest is tax-deductible. A 6% loan at a 25% tax rate costs 6% × (1 − 25%) = 4.50% after tax, because the company saves 25% of the interest in tax. At a 100% tax rate the debt would cost nothing after tax.
Should I use market value or book value weights?
Market value. The weights are what the equity and the debt are worth today — the share price times the shares outstanding, and the market value of the borrowings — not the book values on the balance sheet, which can be years out of date.
How much cost of equity do I need for a 10% WACC?
13.67%. The smallest cost of equity for the WACC to stay at or above 10% is 13.67%. At 13.67% the WACC is 10.002000% — above 10% — and at 13.66% it is 9.996000% — below 10%.
What if the company has no debt?
The WACC is the cost of equity. At $0 of debt the weight of debt is 0% and the WACC is 12.00% — the shareholders are the only funders. At $0 of equity the WACC is the after-tax cost of debt — 4.50%.
What is the difference between WACC and the cost of equity?
One is the average, the other is one ingredient. The cost of equity is what the shareholders demand — 12% here. The WACC is the average of that and the after-tax cost of debt, weighted by how much of each the company uses — 9.00% here. Use the WACC as the discount rate in the net present value calculator.