Result
WACC
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
WACC = (equity's share × required return on equity) + (debt's share × cost of debt × (1 − tax rate)). Shares are computed against the combined value of equity and debt.
The cost of debt is taken after tax because loan interest usually reduces taxable profit — this is called the "tax shield": the real cost of borrowed money to the business is lower than the stated rate by the amount of tax saved.
WACC is most often used as the discount rate in an NPV calculation: it represents the minimum return a project needs to earn to justify the money both shareholders and lenders put into the business. A project returning less than WACC destroys company value even if it's technically profitable.