The Blended Cost of Capital for the Whole Firm

WACC is the weighted average of what equity and debt investors require. It is the discount rate for firm-level DCF (FCFF).

WACCCost of CapitalCapital StructureDiscount Rate

Live Result

0.0975

ƒ: (E/(E+D)) * ke + (D/(E+D)) * kd * (1 - tax)raw: 0.0975000

ƒ(x)

Use variable names from the panel above (e.g. FV, r, n) — or type numbers directly: 10000 / (1 + 0.08)^10

Market value of equity

E = 700

Market value of debt

D = 300

ke% as decimal

Cost of equity (from CAPM)

ke = 0.12

kd% as decimal

Pre-tax cost of debt

kd = 0.06

tax% as decimal

Marginal tax rate

tax = 0.25

💡 You can also enter values directly in the formula: 10000 / (1 + 0.08)^10

⬇ Export Calculation

Exports a plain .txt file with your expression, formula, all variable values, result, and educational notes — ready to paste into any report, Word doc, Notion, or Google Docs.

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Learn: The Blended Cost of Capital for the Whole Firm

Estimating Discount Rates · Educational Guide

The Core Idea

A company is financed by two groups: equity investors (shareholders) and debt holders (bondholders/banks). Each demands a different return. WACC is the weighted average of both — the company's total cost of funding.

How It Works

WACC = (E/V) × ke + (D/V) × kd × (1−tax). Weights are based on market value proportions. It represents the minimum return the company must earn on all its assets to satisfy both shareholders and creditors.

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Real-World Example: E = $700M, D = $300M, ke = 12%, kd = 6%, tax = 25%: WACC = (700/1000) × 12% + (300/1000) × 6% × 0.75 = 8.4% + 1.35% = 9.75%. Every dollar invested must return at least 9.75% to cover capital costs.

The Blended Cost of Capital for the Whole Firm

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