WACC & Blended Debt Calculator
Calculate corporate Weighted Average Cost of Capital and multi-tranche blended borrowing rates.
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Understanding corporate WACC and debt structure
The Weighted Average Cost of Capital serves as the discount rate for future cash flows in DCF valuation models. By correctly blending senior debt, mezzanine loans, and equity costs, managers determine the firm's true hurdle rate.
Where E is market value of equity, D market value of debt, V = E + D, Re the cost of equity, Rd the blended cost of debt, and Tc the corporate tax rate. Only the debt leg carries the tax shield, because only interest is deductible — dividends are not.
Related calculators
- Blended rate calculator — weighted average across any number of debt tranches.
- Blended tax rate calculator — the effective rate behind the tax shield.
- Debt consolidation calculator — blend multiple balances and rates without the equity leg.
Frequently asked questions
What is WACC (Weighted Average Cost of Capital)?
WACC represents a company's average cost of capital from all sources, including common stock, preferred stock, bonds, and other long-term debt, weighted by their respective proportions.
How does debt tax shield lower the cost of debt in WACC?
Interest paid on corporate debt is tax-deductible in most jurisdictions. The after-tax cost of debt equals the nominal blended interest rate multiplied by (1 - Corporate Tax Rate).
Why is blended cost of debt important for corporate finance?
Most corporations hold multiple layers of debt (e.g., bank term loans, senior notes, mezzanine financing). Calculating the blended cost of debt determines the true hurdle rate for new capital expenditures.
How is the blended cost of debt calculated across tranches?
Weight each tranche by its outstanding balance: multiply each balance by its interest rate, sum the results, then divide by total debt outstanding. This is the same weighted-average method used for any blended rate — a large cheap term loan will dominate a small expensive mezzanine layer.
Scope. This calculator applies the standard WACC formula to values you supply. It does not derive the cost of equity for you (no CAPM beta lookup), handle preferred stock as a separate leg, adjust for country risk or non-deductible interest under thin-capitalisation rules, or unlever a comparable company's beta. It is not investment advice.
Just blending debt tranches?
Skip the equity leg and get a straight weighted-average rate.