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CapCost
Find the blended rate your company pays to finance its assets — equity and debt combined.
WACC is the minimum return a company must earn on its existing assets to satisfy its creditors, owners, and other capital providers. It blends the cost of equity (what shareholders expect) and the after-tax cost of debt (interest expense adjusted for the tax shield). A lower WACC means cheaper capital and higher valuations.
WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc), where E = equity value, D = debt value, V = E + D, Re = cost of equity, Rd = cost of debt, Tc = corporate tax rate. Debt gets a tax benefit because interest is deductible, which is why the (1 − Tc) term appears on the debt side.
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OpenWeighted average cost of capital
9.86%
What you entered
Total capital (V = E + D)
$500,000.00 + $200,000.00= $700,000.00Equity weight (E/V)
$500,000.00 ÷ $700,000.00= 71.43%Debt weight (D/V)
$200,000.00 ÷ $700,000.00= 28.57%Equity component (E/V × Re)
71.43% × 12%= 8.57%After-tax debt component (D/V × Rd × (1 − Tc))
28.57% × 6% × (1 − 25%)= 1.29%WACC
8.57% + 1.29%= 9.86%Result
WACC: 9.86%
With $500,000 in equity and $200,000 in debt, the blended after-tax cost of capital is 9.86%. Any project must earn above this rate to create value.