# Rewriting WACC Formula

$$WACC = \frac{E}{V} * R_e + \frac{D}{V} *R_D(1-T_c)$$

where $$R_D$$ should be the cost of the debt. $$T_c$$ is the tax rate. When googling the formula for cost of debt I find $$Cost of debt = R_D = Interest*(1-tax rate)$$

But this looks identical to the $$R_D(1-T_c$$) part, if only $$R_d$$ was interest rate in the WACC Formula. Does this mean we can rewrite WACC to

$$WACC = \frac{E}{V}*R_e +\frac{D}{V}*r_i*(1-T_c)^2$$ where $$r_i$$ is the interest rate, or is there something I'm not understanding correctly here?

• No, there is no squared term. It is just a notation difference. – dm63 Feb 21 at 12:22
• What you call "Costofdebt" is the "After Tax Cost of Debt". It is already included in the WACC formula as $R_D(1-T_c)$ – noob2 Feb 21 at 17:20
• I see, thank you – novo Mar 1 at 12:11