Using the Relevered Cost of Capital Calculator

Relevered WACC (Cost of Capital) Calculator computes:

  • Unlevered Ke—unlevered cost of equity

  • Relevered Beta

  • Cost of Debt (after taxes)

  • Relevered Ke—relevered cost of equity

  • Relevered Kc—relevered weighted average cost of capital

The beta used to calculate the Cost of Equity incorporates the financial risk of a capital structure—if the capital structure changes, WACC and the Cost of Debt may reflect the revised financial risk.

To recalculate WACC under a different mix of debt and equity, you unlever the capital to examine the cost if the company had no debt. You can relever it using the capital structure. You calculate this with Relevered WACC Calculator.

In addition to the current cost of capital inputs, you must enter a Cost Of Debt at New Target and a Debt to ... Ratio to reflect the target capital structure. These inputs relever the cost of equity based on the Hamada formula.

Note:

For all numeric values, use integers with decimal places. For example, enter 5.57% as 5.57, not .0557.

  To use Relevered WACC Calculator:

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

  2. In Risk Free Rate, enter a value.

  3. In Market Risk Premium, enter a value.

  4. In Cost of Equity, enter a value.

  5. In Cost of Debt, enter a pre-tax value at the target capital structure.

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

  7. In Cost of Preferred (%), enter a value.

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

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

    • Select Equity if the leverage ratio is based on debt to equity.

    • Select Total Capital if the leverage ratio is based on debt to total capital.

  9. In Debt To... Ratio , enter the leverage ratio based on Equity or Total Capital.

  10. In Target Debt To... Ratio, enter a value at the capital structure.

  11. In Preferred to... Ratio, enter the leverage ratio based on Equity or Total Capital.

  12. Results displays calculated values of:

    • Unlevered Ke—unlevered cost of equity

    • Relevered Beta

    • Cost of Debt (after taxes)

    • Relevered Ke—relevered cost of equity

    • Relevered Kc—relevered weighted average cost of capital