WACC Calculator

WACC is the discount rate used in DCF (discounted cash flow) analysis to convert future cash flows into present value. A company's intrinsic value falls as WACC rises, because a higher cost of capital means future cash flows are worth less today.

Context matters significantly. Capital-intensive utilities and large-caps often have WACCs of 6–8%. Technology and growth companies typically fall in the 9–14% range. Smaller or riskier businesses may exceed 15%. The most meaningful comparison is WACC vs. ROIC (return on invested capital) — a company creates value when ROIC > WACC.

Debt typically lowers WACC because interest expense is tax-deductible (the (1 − Tc) term). However, higher leverage increases financial risk, which raises beta and therefore the cost of equity — partially offsetting the benefit. Optimal capital structure balances these forces.

Most practitioners use the current yield on a 10-year US Treasury bond as the risk-free rate. As of early 2026, the 10-year yield is approximately 4.3–4.7%. The rate should match the currency and time horizon of the cash flows being discounted.

In a DCF model, intrinsic value equals the present value of all future free cash flows, discounted at WACC. A higher WACC compresses intrinsic value; a lower WACC expands it. Use Equity Rank's Intrinsic Value Calculator to see how changing your discount rate affects fair value estimates.

A tax rate of 0% is a valid entry — a company with no current tax charge has no interest tax shield, so the after-tax cost of debt equals the pre-tax cost. This calculator uses the 0% you enter rather than substituting a default. A rate above 100% is not admissible: the after-tax cost of debt is Rd × (1 − Tc), so a rate above 100% turns that term negative and the debt component would subtract from the weighted average, producing a lower WACC purely from the sign of the input. The calculator withholds the WACC figure and its rating in that case, and reports the capital-structure weights, which do not depend on the tax rate.