# Using the Cost of Capital Calculator

WACC (Cost of Capital) Calculator computes:

• Cost of Equity

• After-tax Cost of Debt

• Weighted average Cost of Capital

The cost of capital represents an investor's required rate of return on an investment and should be a company's minimum acceptable rate of return for anticipated investments. It should be a company's objective to earn rates of return above its cost of capital to maximize its shareholder's investment.

 Note: For all numeric values, use integers with decimal places. For example, enter 5.57% as 5.57, not .0557. To use WACC Calculator:

1. Select Analysis, then Tools/Calculators, and then WACC.

2. In Risk Free Rate, enter a rate.

3. In Equity Beta, enter a value.

4. In Market Risk Premium, enter a value.

5. In Cost of Debt (%) enter the pre-tax percentage.

6. In Marginal Tax Rate (%), enter a percentage.

7. In Cost of Preferred, enter a value.

Use zero if the company you are analyzing does not have preferred stock.

8. Select an Enter Leverage As A Function Of option:

• Select Equity to base leverage ratio on debt to equity.

• Select Total Capital to base leverage ratio on debt to total capital.

9. In Debt To... Ratio, enter a value to base leverage ratio on Equity or Total Capital.

10. In Preferred to... Ratio, enter a value to base the leverage ratio on Equity or Total Capital.

11. Results displays the values of:

• Cost of Equity

• After-tax Cost of Debt

• Weighted average Cost of Capital