What is the WACC with 50% equity at 8% and 50% debt at 5%, taxed at 25%?
5.88%
With 50% equity costing 8% and 50% debt costing 5% before a 25% tax shield, the weighted average cost of capital is 5.88%.
How it is worked out
Weight each source of capital by its share of the total, then blend the costs. Debt is multiplied by (1 − tax rate) because interest is deductible; equity is not.
(50% × 8%) + (50% × 5% × (1 − 25%)) = 5.88%
The tax shield takes debt's effective cost from 5% to 3.75%.
Open the full WACC calculator to use your own figures.
Similar questions
- 50/50 · 8% / 5% · 21% tax = 5.98%
- 50/50 · 8% / 6% · 21% tax = 6.37%
- 50/50 · 8% / 6% · 25% tax = 6.25%
- 50/50 · 8% / 8% · 21% tax = 7.16%
- 50/50 · 8% / 8% · 25% tax = 7%
- 50/50 · 10% / 5% · 21% tax = 6.98%
Questions
- What is the WACC with 50% equity at 8% and 50% debt at 5%, taxed at 25%?
- With 50% equity costing 8% and 50% debt costing 5% before a 25% tax shield, the weighted average cost of capital is 5.88%. (50% × 8%) + (50% × 5% × (1 − 25%)) = 5.88%.
- How is this worked out?
- Weight each source of capital by its share of the total, then blend the costs. Debt is multiplied by (1 − tax rate) because interest is deductible; equity is not.
- Can I use my own figures?
- Yes — the WACC calculator takes any values and shows the full result.