Weighted Average Cost of Capital (WACC) Calculator

Peloton Corporate has created a free WACC calculator which enables calculation of various forms of WACC:

• Pre-tax
• Post-tax
• Nominal (including inflation/growth)
• Real
• Gamma-adjusted

WACC is best applied to cashflows defined in the same way (e.g. nominal post-tax WACC is applied to nominal post-tax cashflows).

Disclaimer: The reliability of the WACC calculator is entirely dependent on the reliability and appropriateness of the WACC calculator inputs.

For example, the WACC calculator is based on the Capital Asset Pricing Model which assumes that the cashflow are long-term (amongst other things). Consequently, it is appropriate to use a long-term measure of beta and riskless rates, not short-term estimates.

Some of the most critical inputs to the WACC calculator typically require extensive and detailed research and analysis before they should be relied on. For example:

1. Equity Beta is a measure of relative risk and requires either the use of the company’s actual equity beta or an assessment which considers factors such as the relative financial performance of the company as compared to its peers.
2. Given the long-term perspective of WACC, gearing is often best-assessed in terms of a target or expected gearing over time. This can sometimes require a shadow credit rating to be performed in order to determine the ‘optimal’ debt/equity relationship to minimise the overall cost of capital. If you wish to employ the actual gearing of the company, you can choose to de-lever the peer group equity beta and then re-gear the peer group asset beta with the company’s gearing.

You can still use the WACC calculator without this research and analysis but be aware that the WACC outcome should not be relied on for (e.g.) accounting standards requirements (e.g. AASB136), pricing decisions, investment decisions or any other use which is likely to have significant financial impacts.

If you need assistance with any of these purposes, you should reach out to one of the Peloton team (helpme@peloton.group) to discuss how we can provide a more reliable WACC estimate.