WACC Calculator
Calculate the weighted average cost of capital (WACC) from equity, debt, and their costs after tax. Use it to value companies and judge projects.
WACC
12.55%
Average cost of every rupee of capital
After-tax cost of debt
6.75%
Before tax: 9%
Equity weight
80%
Debt weight: 20%
Total capital
₹1,00,00,000
WACC is the discount rate used in company and project valuation. Interest on debt is tax-deductible in India, so the cost of debt is applied after tax: 9% at a 25% tax rate costs only 6.75%.
Last updated: August 2026
How this calculator is verified
Checked by True Calculator automated test suite on
- Formula verified against a published worked example in the automated test suite
- Edge cases (zero, negative, boundary and unit-mismatch inputs) covered by unit tests
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When to Use This Calculator
WACC is the discount rate that connects a company's funding to its value. Analysts valuing Indian listed companies discount projected cash flows at WACC to arrive at intrinsic value; founders raising a round use it to check whether the business returns more than the capital costs; and bankers appraising SME loans compare a borrower's ROIC with its WACC to judge creditworthiness. For private businesses, WACC is built from the owner's expected return and the actual interest paid on loans, then used to evaluate expansion projects, machinery purchases and even whether to buy out a partner. Investors holding diversified portfolios use sector WACCs to decide between capital-heavy infrastructure and asset-light services. Because every valuation — DCF, LBO or project appraisal — rests on the discount rate, getting WACC right matters more than any other single input.
How to Use This Calculator
- Step 1: Enter the market value of the company's equity — shares outstanding times price.
- Step 2: Enter the total debt — loans, bonds and lease liabilities.
- Step 3: Enter the cost of equity and the pre-tax cost of debt as percentages.
- Step 4: Enter the tax rate and read the WACC, which blends both costs after the tax shield on interest.
Worked Example
A Bengaluru manufacturing company is valued at ₹80 lakh of equity and carries ₹20 lakh of debt. Its shareholders expect 14% returns and its bank charges 9% on the loan. At a 25% tax rate, the after-tax cost of debt is 6.75%, because interest is deductible. Weighting 80% equity and 20% debt gives a WACC of 0.80 × 14% plus 0.20 × 6.75%, which equals 12.55%. Every project the company funds must clear this 12.55% hurdle to create value for its owners and lenders.
Tips and Common Mistakes
- •Tip 1: Use market values of equity, not book values, for a realistic weighting.
- •Tip 2: Match the cost of debt to its after-tax value — the tax shield is real in India under both regimes.
- •Tip 3: Recalculate WACC whenever interest rates or the capital mix change, since the number drives valuations.
- ✗Mistake 1: Forgetting the tax adjustment on debt — using pre-tax 9% instead of 6.75% overstates WACC for an 80:20 mix.
- ✗Mistake 2: Entering equity below zero or a 100% tax rate, which the calculator rejects as invalid inputs.
Frequently Asked Questions
What does WACC mean for a company?
WACC is the average return a company must earn on its assets to satisfy both lenders and shareholders. If a business earns less than its WACC, it is destroying value; earning more creates value.
Why is the cost of debt adjusted for tax in India?
Interest payments are tax-deductible business expenses under the Income Tax Act, so the government effectively subsidises part of the interest cost. At a 25% corporate tax rate, a 9% loan costs only 6.75% after tax, which lowers the overall WACC.
How do I estimate the cost of equity?
Common approaches are the CAPM formula (risk-free rate plus a market-risk premium times beta) or the earnings yield on the company's shares. For a private Indian business, owners often use the return they could earn elsewhere, say 12–16%.
What is a reasonable WACC for an Indian company?
It varies by industry and interest rates. Capital-heavy sectors like utilities and steel tend to have lower WACCs, while startups and high-growth companies carry higher costs of equity, pushing WACC into the high teens.
Can WACC be used to value a small business?
Yes. Discounting the business's projected free cash flows at its WACC gives a DCF valuation. For small firms, estimate equity value as the owner's investment, debt as outstanding loans, and adjust the cost of equity for the risk of the specific industry.
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