WACC Calculator (VND)
WACC — the weighted average cost of capital — is the single hurdle rate a business has to clear to keep both its shareholders and its lenders happy. No company raises money for free: equity investors demand a return for the risk they take, and banks charge interest on loans. WACC blends those two costs in proportion to how much of each the firm uses, producing one discount rate you plug into project valuation, NPV calculations, or a discounted-cash-flow valuation of the whole company.
What makes debt deceptively cheap is the tax shield: interest is deductible before corporate income tax, so the government effectively absorbs part of the cost. The true cost of debt is therefore not the headline rate but the after-tax rate = rate × (1 − tax). Under an illustrative 10% borrowing rate and Vietnam's 20% corporate income tax, the after-tax cost of debt drops to 8.00%. That is why moderate leverage can lower WACC — though borrow too aggressively and rising bankruptcy risk pushes both the cost of equity and the cost of debt back up.
The calculator above takes your equity value, debt value, cost of equity, cost of debt and tax rate, then returns each source's weight, the after-tax cost of debt, and the blended WACC. For a capital structure of 6.000.000.000 equity and 4.000.000.000 debt — that is 60% equity and 40% debt — the illustrative WACC works out to 12.20%. One caveat runs through everything here: the cost figures in these examples are illustrative assumptions, not quotes. A real cost of equity has to be estimated (usually via CAPM), and the cost of debt depends on the specific facility and the date you borrow.
How the calculator computes WACC
The core formula
WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc)
| Symbol | Meaning |
|---|---|
| E | Market value of equity (6.000.000.000 VND) |
| D | Market value of interest-bearing debt (4.000.000.000 VND) |
| V | Total capital = E + D (10.000.000.000 VND) |
| Re | Cost of equity — the return shareholders require (15%) |
| Rd | Pre-tax cost of debt (10%) |
| Tc | Corporate income tax rate (20%) |
The tool runs three steps: (1) compute the weights, E/V = 60% and D/V = 40%; (2) compute the after-tax cost of debt, Rd × (1 − Tc) = 10% × (1 − 20%) = 8.00%; (3) add the two weighted components. Every number in the worked-example table below reconciles by hand.
Why use the after-tax cost of debt?
Interest expense is tax-deductible: each dong of interest paid reduces taxable income, so the tax authority shoulders a slice equal to the tax rate. The real burden of the loan is therefore Rd × (1 − Tc), not Rd. This tax shield is what makes debt cheaper than equity at the same risk level, and it is the main reason a firm's WACC sits below its pure cost of equity.
Why the weights matter
WACC is a market-value weighted average, not a simple mean. The more a company leans on equity (the pricier source), the closer WACC moves to Re; the more it uses debt (cheaper after tax), the lower WACC drops — up to a safe limit. With no debt at all, WACC equals the cost of equity, 15.00%; flip the mix to a debt-heavy 4bn equity / 6bn debt and WACC falls to 10.80%.
What the model leaves out
The calculator assumes the cost of equity and cost of debt are fixed regardless of leverage — in reality, more debt raises risk and pushes both Re and Rd up (capital-structure theory). It also treats your inputs as market values and ignores flotation costs, preferred stock and changing tax positions. Read the resulting WACC as an estimate to use as a discount rate, not a precise constant.
Worked example: WACC of a 10.000.000.000 VND firm
Illustrative assumptions: 6.000.000.000 of equity at a 15% cost of equity, 4.000.000.000 of debt at a 10% pre-tax rate, and a 20% corporate income tax rate (Vietnam's standard CIT).
| Component | Value | Weight | Cost | Contribution to WACC |
|---|---|---|---|---|
| Equity (E) | 6.000.000.000 | 60% | 15% | 9.00% |
| Debt (D) | 4.000.000.000 | 40% | 8.00% (after tax) | 3.20% |
| Total (V) | 10.000.000.000 | 100% | 12.20% |
Three things stand out.
- The tax shield cuts the debt burden. The headline borrowing rate is 10%, but after the 20% shield the effective cost of debt is only 8.00%. Skip this step and you overstate WACC.
- Equity dominates the blend. Because E/V = 60% and Re of 15% is expensive, the equity leg alone contributes 9.00%, while debt adds just 3.20%. The final WACC is 12.20%.
- This is the minimum acceptable return. A project with an IRR below 12.20% destroys value — it does not earn enough to pay both the shareholders and the lenders.
Try changing the debt-to-equity split to watch WACC move, then feed the result into FiMo's NPV and IRR calculators as the discount rate when you value a project.
Frequently asked questions
What is WACC and what is it used for?
WACC (weighted average cost of capital) is the minimum return a business must earn to satisfy both its shareholders and its lenders. It blends the cost of equity and the after-tax cost of debt by each source's weight, giving a single discount rate you use for NPV, project appraisal and company valuation. Illustrative example: 6.000.000.000 VND of equity at 15% and 4.000.000.000 VND of debt at 10%, taxed at 20%, gives a WACC of 12.20%.
What is the WACC formula?
WACC = (E/V) × Re + (D/V) × Rd × (1 − Tc), where E is equity, D is debt, V = E + D, Re is the cost of equity, Rd is the pre-tax cost of debt and Tc is the tax rate. You multiply each source's weight by its cost and add them, applying (1 − Tc) to the debt leg because interest is tax-deductible. Example: E/V = 60%, D/V = 40%, after-tax cost of debt 8.00% → WACC 12.20%.
Why is the cost of debt calculated after tax?
Because interest is deductible before corporate income tax: every dong of interest paid lowers taxable income, so the tax authority effectively covers a portion equal to the tax rate. The real burden of the loan is therefore Rd × (1 − Tc), not Rd. With a 10% rate and 20% tax, the after-tax cost of debt is only 8.00%. This tax shield is what makes debt cheaper than equity at the same risk, and it pulls WACC below the pure cost of equity.
What corporate income tax rate applies in Vietnam?
Vietnam's standard corporate income tax (CIT) rate is 20%, applied to most companies. Certain incentivised sectors and projects pay a lower rate for a defined period, while oil, gas and rare-resource extraction face higher rates. This calculator uses 20% as the illustrative default — if your business enjoys a tax incentive, enter your actual effective rate so the after-tax cost of debt and the resulting WACC come out correctly.
Does taking on more debt lower WACC?
Up to a point, yes, because after-tax debt is cheaper than equity. Flip the example from 6.000.000.000 equity / 4.000.000.000 debt to a 4bn equity / 6bn debt mix and WACC drops from 12.20% to 10.80%. But more debt does not lower WACC forever: beyond a sensible level, rising bankruptcy risk drives up both the cost of equity and the cost of debt, so WACC turns back up. This simple model holds the costs fixed, so it does not capture that U-shaped curve.
How do you estimate the cost of equity (Re)?
The most common approach is CAPM: Re = risk-free rate + beta × market risk premium. Beta measures how volatile the stock is relative to the market, and the risk premium is the extra return investors demand for holding equities instead of government bonds. Because all three inputs are estimates, Re always carries uncertainty. The WACC tool takes the Re you enter directly (e.g. 15%), so estimate it carefully — it is the most expensive component and has the largest effect on WACC.
Is WACC always the right discount rate for a project?
Only when the project carries the same risk as the company's core operations. WACC is the cost of capital for the whole firm; use it on a riskier venture (say, a brand-new line of business) and you will undervalue the risk — add a premium instead of using 12.20% as-is. A safer-than-average project can justify a lower rate. Applying a single firm-wide WACC to projects of differing risk is a classic valuation error that leads to accepting bad projects or rejecting good ones.