IB Tools

WACC Build-Up Calculator

Work out the discount rate used in a DCF: cost of equity from CAPM, after-tax cost of debt, weighted by market values.

WACC

12.23%

Cost of equity (CAPM)

13.60%

After-tax cost of debt

6.73%

Equity weight

80.0%

Debt weight

20.0%

Equity contribution
10.9
Debt contribution
1.3

Formula

  • Ke = Rf + β × ERP
  • Kd(after tax) = Kd × (1 − t)
  • WACC = E/(D+E) × Ke + D/(D+E) × Kd × (1 − t)

How it works

  1. Cost of equity from CAPM.
  2. Debt is cheaper after tax because interest is tax-deductible.
  3. Weight each by market value and add them up.

Where it's used: The discount rate in every DCF and in capital-budgeting decisions.

Educational tool only. Not investment advice, not a recommendation, and not a substitute for professional valuation work.