WACC calculator
FreeCalculates a company's WACC from an observed beta, a target capital structure, and the cost of equity and cost of debt. Beta is unlevered, then relevered at the target structure (Hamada).
- 5 sheets
- 5 × 5 sensitivity: risk premium × beta
- 4 consistency checks
Method
Observed beta is unlevered with the Hamada formula: βU = βL / (1 + (1 − t) × observed D/E). A single tax rate t is used, and it also drives the tax shield on debt.
The target structure is entered as the debt weight D/(D+E), at market value. The model derives the target D/E and relevers beta: βL = βU × (1 + (1 − t) × target D/E).
Cost of equity follows the CAPM: risk-free rate + relevered beta × equity risk premium + company-specific premium. The specific premium is added as is and is not multiplied by beta.
Pre-tax cost of debt is an input, multiplied by (1 − t). WACC equals the equity weight × cost of equity, plus the debt weight × after-tax cost of debt.
The sensitivity grid varies the equity risk premium (rows) and the relevered beta (columns) over 5 values each, with adjustable steps. The target structure stays fixed. Rates are nominal and annual.
What's in the file
- 01CoverCompany, date, currency and file language, checks status, contents, colour legend and disclaimer.
- 02InputsTax rate, risk-free rate, equity risk premium, observed beta and D/E, specific premium, cost of debt, target structure.
- 03WACCLine-by-line calculation: unlevered beta, target structure, relevered beta, cost of equity, cost of debt, WACC.
- 04OutputsKey figures (WACC, costs, weights, betas) and the equity risk premium × relevered beta sensitivity grid.
- 05ChecksFour consistency checks and the count of failures, which must equal 0.