WACC calculator with CAPM cost of equity
Enter market values of equity and debt, the CAPM inputs for the cost of equity, the pre-tax cost of debt and the tax rate. Use a beta you already have, or unlever a comparable company's beta and relever it at this company's debt-to-equity.
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WACC
9.17%
Cost of equity (CAPM)
10.82%
After-tax cost of debt
5.20%
Equity weight
70.6%
Debt weight
29.4%
Equity beta
1.150
Working
- Cost of equity (CAPM)
Kₑ = 4.5% + 1.150 × 5.5% = 10.82% - Weighted average
WACC = 70.6% × 10.82% + 29.4% × 6.5% × (1 − 20%) = 9.17%
How it's calculated
WACC = E/(D+E) × Kₑ + D/(D+E) × K_d × (1 − t), Kₑ = r_f + β × ERP
- βu
- unlevered (asset) beta = βL ÷ [1 + (1 − t) × D/E]
- βL
- relevered equity beta = βu × [1 + (1 − t) × D/E] at the target D/E
Assumptions
- Market-value weights, constant capital structure.
- Interest is fully tax-deductible at the stated rate.
- Relevering uses the Hamada formula: debt carries no market risk (debt beta of zero), and the target D/E is debt ÷ equity at market values.
Limitations
- Risk-free rate, beta and equity risk premium are estimates; results are only as reliable as these inputs.
- Preferred shares and other capital types are not modelled.
- Hamada overstates levered beta for highly indebted companies, whose debt does carry market risk.
For education and planning. Results are estimates, not financial advice.