Cost of Capital Calculator

Calculator inputs

The page stays in a single-column flow, while the form uses a responsive 3-column, 2-column, and 1-column grid.

Equity cost method

Choose how equity cost will be estimated.

Debt cost method

Select a direct rate or derive it from statements.

Capital weighting method

Use market values or enter your own mix.

Risk-free rate (%)

Beta

Expected market return (%)

Next dividend per share

Current share price

Dividend growth rate (%)

Size premium (%)

Company-specific premium (%)

Debt interest rate (%)

Annual interest expense

Average debt balance

Corporate tax rate (%)

Inflation rate (%)

Market value of equity

Market value of debt

Market value of preferred stock

Preferred annual dividend

Preferred share price

Equity flotation cost (%)

Debt flotation cost (%)

Preferred flotation cost (%)

Custom equity weight

Custom debt weight

Custom preferred weight

Formula used

Cost of equity

CAPM Cost of Equity = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate) + Size Premium + Company Premium

DGM Cost of Equity = (Next Dividend / Share Price) × 100 + Growth Rate + Size Premium + Company Premium

Adjusted Equity Cost = Base Equity Cost / (1 − Equity Flotation Rate)

Cost of debt and preferred stock

Pre-Tax Debt Cost = Debt Rate or (Interest Expense / Average Debt) × 100

Adjusted Debt Cost = Pre-Tax Debt Cost / (1 − Debt Flotation Rate)

After-Tax Debt Cost = Adjusted Debt Cost × (1 − Tax Rate)

Preferred Cost = (Preferred Dividend / Preferred Price) × 100 / (1 − Preferred Flotation Rate)

Weighted average cost of capital

WACC = (Weight of Equity × Cost of Equity) + (Weight of Debt × After-Tax Debt Cost) + (Weight of Preferred × Cost of Preferred)

Real WACC = ((1 + Nominal WACC) / (1 + Inflation Rate)) − 1

Enter all percentage rates as percentages, not decimals. For example, enter 8.25 for 8.25%.

How to use this calculator

Step-by-step workflow

Select an equity method, debt method, and weighting method.
Enter risk, return, tax, and flotation assumptions.
Provide debt, equity, and preferred capital values.
Submit the form to calculate nominal and real WACC.
Review the result cards, detailed table, and graph.
Export the summary through CSV or PDF buttons.

Useful interpretation notes

Higher WACC usually means a higher hurdle rate.
Debt lowers WACC only when tax benefit outweighs risk.
Flotation costs increase effective financing cost.
Market weights usually reflect current investor expectations better.
Real WACC helps compare returns in inflation-adjusted terms.

Example data table

Input / Output	Example value	Notes
Risk-free rate	4.50%	Used in the CAPM approach.
Beta	1.15	Measures systematic equity risk.
Expected market return	10.50%	Combined with the risk-free rate for premium.
Debt interest rate	6.80%	Pre-tax debt financing rate.
Corporate tax rate	25.00%	Creates the tax shield on debt.
Market value of equity	$2,500,000	Main equity funding source.
Market value of debt	$1,000,000	Interest-bearing capital value.
Market value of preferred	$250,000	Optional preferred stock layer.
Calculated WACC	10.33%	Approximate result from the sample assumptions.
Calculated real WACC	7.12%	Approximate inflation-adjusted result.

FAQs

1) What does cost of capital measure?

It measures the average return required by investors and lenders to finance a business. Companies often use it as a hurdle rate for valuation, budgeting, and performance review.

2) Why is WACC important?

WACC helps compare projects against a required return. If a project cannot exceed that financing cost, it may destroy value instead of creating it.

3) Why are market weights often preferred?

Market weights reflect current investor pricing and financing conditions. That usually makes them more relevant than old book values when estimating present capital costs.

4) Why is debt adjusted for tax?

Interest expense is often tax-deductible. That tax shield lowers the effective cost of debt, so after-tax debt cost is usually the correct debt input for WACC.

5) When should I use custom weights?

Use custom weights when planning a target capital structure, testing future financing mixes, or comparing scenarios that differ from today’s market-value proportions.

6) What are flotation costs?

Flotation costs are issuance expenses such as underwriting, legal, and registration fees. They raise the effective cost of new capital and should be considered in project funding decisions.

7) Should preferred stock always be included?

Include preferred stock when it is a meaningful financing source. If the company has no preferred capital, leave its value at zero and the calculator will reduce its influence.

8) Why does the calculator show real WACC?

Real WACC removes inflation from the nominal rate. That helps when project cash flows, valuation assumptions, or performance targets are being modeled in real terms.