WACC Calculator mechanism

Model scope

The arithmetic formula is correct under the stated assumptions, but the catalog specification needs to define V explicitly as E+D and document whether values are market or book values. The honest label is directionally appropriate; it should also state that the result is a simplified educational estimate and not individualized investment, tax, or legal advice.

• The formula is standard only when V is explicitly defined as total capital value, normally V=E+D using consistent market values. V is absent from the listed inputs, so this definition must be added.
• The formula assumes the debt-interest tax shield is fully usable and that Tc is the applicable marginal corporate tax rate; this limitation should be stated explicitly.

Units and conventions

• Equity value and debt value must use the same currency and valuation basis, preferably current market values rather than book values.
• Cost of equity, cost of debt, and tax rate are entered as decimal fractions: 10% = 0.10, 25% = 0.25.
• The displayed WACC percentage is the decimal result multiplied by 100.
• V is assumed to equal E+D; therefore E+D must be greater than zero.

Inspectable vector

One of 4 source-bound review vectors:

{
  "inputs": {
    "equity_value": 600000000,
    "debt_value": 400000000,
    "cost_of_equity": 0.1,
    "cost_of_debt": 0.06,
    "tax_rate": 0.25
  },
  "expected_outputs": {
    "WACC_percent": 7.8
  },
  "working": "V=600,000,000+400,000,000=1,000,000,000. E/V=600,000,000/1,000,000,000=0.60. D/V=400,000,000/1,000,000,000=0.40. Equity contribution=0.60×0.10=0.060. After-tax debt contribution=0.40×0.06×(1−0.25)=0.40×0.06×0.75=0.018. WACC=0.060+0.018=0.078. As a percentage, 0.078×100=7.8%."
}

Failure boundary

BREAK_CLAIMED · SELF_FLAGGED

The denominator V=E+D can be zero, producing an undefined WACC, and the specification does not define unit handling for percentage inputs, allowing radically different results.

Other records

Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

• VERIFIED_LEDGER.json
• evidence-tranche4/tranche4-results.json
• BOUNDARY_HAZARD_CATALOG.json