# How to calculate WACC in Excel

Weight the cost of equity and the after-tax cost of debt by their shares of the total: `=B2/(B2+B3)*B4+B3/(B2+B3)*B5*(1-B6)`.

**Excel:** `=B2/(B2+B3)*B4+B3/(B2+B3)*B5*(1-B6)` (Every current version)

**Google Sheets:** the same formula works.

## Example

Sample data (row 1 is the header):

| A | B |
| --- | --- |
| Company | Value |
| Market value of equity | 4800000 |
| Market value of debt | 1900000 |
| Cost of equity | 0.112 |
| Cost of debt (pre-tax) | 0.064 |
| Tax rate | 0.25 |
| WACC |  |

Formula in B7: `=B2/(B2+B3)*B4+B3/(B2+B3)*B5*(1-B6)`

Result: 9.39%

## How it works

Equity is 71.6% of the $6.7 million of capital and debt 28.4%. Each share is multiplied by its cost, and debt's cost is reduced by the tax rate because interest is tax-deductible: 6.4% × (1 − 25%) = 4.8%. The weighted total, 9.39%, is the return the company's projects need to beat.

## Other ways

- `=SUMPRODUCT(B2:B3,VSTACK(B4,B5*(1-B6)))/SUM(B2:B3)`: The same weighting written as SUMPRODUCT, which scales to more sources of capital.
- `=B2/(B2+B3)*B4+B3/(B2+B3)*B5`: Without the tax shield, WACC is overstated. (Before tax: 9.84%.)

## Common mistakes

- Use market values where you can; book values can be far from what investors would pay today.
- Only debt gets the (1 − tax) adjustment, since dividends aren't tax-deductible.

## Questions

**How do I estimate the cost of equity?**

With CAPM: `=risk_free+beta*(market_return-risk_free)`.

**How is WACC used?**

As the discount rate in NPV for projects with the company's usual risk.

Every formula and result on this page was checked by running it in the Spreadsheet Practice formula engine on 2026-10-30.

Source: https://spreadsheetpractice.com/formulas/calculate-wacc