What is the Cost of Capital Calculator?

The Cost of Capital Calculator helps determine the overall cost a company incurs to finance its operations through a combination of equity and debt. By inputting the total equity, total debt, cost of equity, cost of debt, and corporate tax rate, the calculator computes the weighted cost of capital. This value indicates how expensive it is for a business to raise funds and guides financial decisions regarding investments, financing, and capital structure. A lower cost of capital signifies cheaper financing, which can improve profitability and business sustainability.

How to Use:

1. Enter Total Equity (PKR): Input the company’s total shareholder equity.
2. Enter Total Debt (PKR): Input the company’s total borrowings or liabilities.
3. Enter Cost of Equity (%): Input the expected return required by shareholders.
4. Enter Cost of Debt (%): Input the interest rate or cost paid on debt.
5. Enter Corporate Tax Rate (%): Input the applicable tax rate for the company.
6. Click “Calculate”: The calculator will display the cost of capital as a percentage.
7. Review Result: The output shows the computed cost of capital along with the formula and a note emphasizing that a lower value means cheaper financing for the business.