Cost of Capital Calculator
Results are estimates based on the values you enter. Recheck your inputs and assumptions before using the output for decisions.
Estimate blended cost of capital from equity capital, debt capital, cost of equity, and cost of debt.
Cost of Capital Calculator
Free online cost of capital calculator to estimate the blended cost of financing from equity and debt sources. This calculator is useful for business owners, investors, finance students, analysts, CFO teams, startup founders, and anyone evaluating how expensive a company’s capital mix is. Cost of capital matters because it shows the minimum return a business should aim to earn on projects in order to justify the cost of the money used to fund them. When capital comes from more than one source, such as equity and debt, a blended rate often gives a more realistic baseline than looking at each source in isolation.
This calculator uses four main inputs. Equity capital means the amount financed by owners or shareholders. Cost of equity means the required return expected by equity investors. Debt capital means the amount financed by borrowing. Cost of debt means the annual rate paid on borrowed capital. Once those values are entered, the calculator shows total capital, cost of capital, weighted equity cost, weighted debt cost, and annual capital cost. These outputs help you see not only the final blended percentage but also how much each capital source contributes to the total financing burden.
The formula of cost of capital
Total capital = Equity capital + Debt capital
Weighted equity cost = (Equity capital / Total capital) x Cost of equity
Weighted debt cost = (Debt capital / Total capital) x Cost of debt
Cost of capital = Weighted equity cost + Weighted debt cost
Annual capital cost = Total capital x Cost of capital
Here equity capital means the portion of funding provided by owners, cost of equity means the return demanded by those owners, debt capital means the borrowed portion of funding, cost of debt means the interest rate or borrowing cost on that debt, weighted equity cost means the equity share adjusted for its cost, weighted debt cost means the debt share adjusted for its cost, and cost of capital means the blended annual financing rate across both sources.
Solved Example
Example 1: Find the cost of capital if equity capital is $600,000, cost of equity is 12%, debt capital is $400,000, and cost of debt is 6%.
Solve: Total capital = 600000 + 400000 = $1,000,000
Weighted equity cost = (600000 / 1000000) x 12% = 7.20%
Weighted debt cost = (400000 / 1000000) x 6% = 2.40%
Cost of capital = 7.20% + 2.40% = 9.60%
Annual capital cost = 1000000 x 9.60% = $96,000.00
Example 2: Find the result if equity capital is $800,000, cost of equity is 10%, debt capital is $200,000, and cost of debt is 5%.
Solve: Total capital = $1,000,000
Weighted equity cost = 8.00%
Weighted debt cost = 1.00%
Cost of capital = 9.00%
Annual capital cost = $90,000.00
Example 3: Find the result if equity capital is $300,000, cost of equity is 14%, debt capital is $700,000, and cost of debt is 7%.
Solve: Total capital = $1,000,000
Weighted equity cost = 4.20%
Weighted debt cost = 4.90%
Cost of capital = 9.10%
Annual capital cost = $91,000.00
Table of cost of capital calculator
| Equity Capital | Debt Capital | Cost of Capital | Annual Capital Cost |
|---|---|---|---|
| $300,000 | $700,000 | 9.10% | $91,000.00 |
| $500,000 | $500,000 | 8.50% | $85,000.00 |
| $600,000 | $400,000 | 9.60% | $96,000.00 |
| $800,000 | $200,000 | 9.00% | $90,000.00 |
How to use this cost of capital calculator
Enter the equity capital and cost of equity in the proper input fields. After that, enter the debt capital and cost of debt. Then click the calculate button. The calculator will show total capital, cost of capital, weighted equity cost, weighted debt cost, and annual capital cost in the result box.
This calculator is especially useful when comparing financing structures. A company funded mostly with equity may face a higher blended cost if equity investors demand a high return. A company funded with more debt may see a lower blended rate before tax, but higher leverage can increase financial risk. By separating the weighted equity and debt pieces, the calculator makes the blended result easier to understand and explain in capital budgeting or financing discussions.
When using the result, remember that this calculator gives a simple blended pre-tax cost of capital from debt and equity only. Real-world analysis can also include taxes, preferred stock, changing capital structure, and market-based return estimates. If you need the tax-adjusted weighted average cost of capital, that is usually handled in a separate WACC calculation. Even so, this calculator gives a clear and practical baseline for understanding how a company’s current mix of debt and equity contributes to its financing cost.