Weighted average cost of capital (WACC): How we calculate
Weight your entered equity and debt costs.
How we calculate
Weighted average cost of capital (WACC) weights equity and debt costs by their entered values. An interest tax shield is not assumed automatically for an Estonian company; enable it only as an explicit scenario.
What the figures mean
- Weighted average cost of business funding (WACC)
Combines the cost of equity and borrowing according to their shares. The debt tax adjustment applies only when explicitly selected in the model.
Simple example: Half the funding costs 10% and half 6%, with no tax adjustment: the weighted cost is 8%.
- Owners’ equity
In company accounts, assets less liabilities. In a property investment, your initial equity is your own money; the estimated value of your stake can differ from that amount.
Simple example: Company assets of €100,000 less €60,000 liabilities leave €40,000 of book equity.
Worked example
These illustrative inputs let you check the method. They are not figures for a real company or automatically current tax rates.
Inputs
- Equity value
- 750,000
- Debt value
- 250,000
- Cost of equity (%)
- 10
- Cost of debt (%)
- 5
Results
- Weighted capital cost (WACC)
- 8.75
- Equity weight
- 75
- Debt weight
- 25
Change assumptions in the calculator and compare outcomes. Money follows your input unit; figures from different periods need adjustment before comparison.