Capital Stack and Blended Cost Calculator
Combine senior debt, mezzanine financing, and preferred equity to calculate a weighted blended cost and visualize each layer of the capital stack.
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Combine senior debt, mezzanine financing, and preferred equity to compare their share of the capital stack and calculate the weighted blended annual capital cost.
Senior Debt
Mezzanine Financing
Preferred Equity
Total Capital Stack
$9,000,000.00
Blended Annual Cost
9.17%
Total Annual Capital Cost
$825,000.00
Funding Gap
$1,000,000.00
Senior Loan to Cost
60.00%
Total Debt to Cost
75.00%
Preferred Equity to Cost
15.00%
Stack Funded
90.00%
Visual Capital Stack
Senior Debt
$6,000,000.00 at 7.00%
$420,000.00 annual cost
Mezzanine Financing
$1,500,000.00 at 12.00%
$180,000.00 annual cost
Preferred Equity
$1,500,000.00 at 15.00%
$225,000.00 annual cost
| Capital Component | Amount | Share of Stack | Annual Cost Rate | Annual Capital Cost |
|---|---|---|---|---|
| Senior Debt | $6,000,000.00 | 66.67% | 7.00% | $420,000.00 |
| Mezzanine Financing | $1,500,000.00 | 16.67% | 12.00% | $180,000.00 |
| Preferred Equity | $1,500,000.00 | 16.67% | 15.00% | $225,000.00 |
| Blended Total | $9,000,000.00 | 100.00% | 9.17% | $825,000.00 |
This calculator treats each entered rate as a simple annual capital cost. Mezzanine financing and preferred equity may also include origination fees, exit fees, payment in kind interest, profit participation, minimum multiples, conversion rights, or accrued returns that increase the effective cost.
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How the Blended Capital Cost Is Calculated
Each capital component is weighted by its share of the total stack. The calculator multiplies the senior debt, mezzanine financing, and preferred equity amounts by their respective annual rates, then divides the combined annual cost by the total capital provided.
Understanding Capital Stack Priority
Senior debt generally has the first repayment priority and the lowest cost. Mezzanine financing sits behind senior debt and usually carries a higher rate or additional participation. Preferred equity is subordinate to debt but senior to common equity distributions, so its required return is typically higher than senior financing.
What the Simple Annual Cost Does Not Capture
A stated annual rate does not always represent the full effective cost. Origination fees, exit fees, accrued or payment in kind interest, profit participation, minimum return multiples, preferred return compounding, and extension fees can materially change the economics. Use the calculator as an initial comparison and review the complete term sheets before selecting a structure.
Capital Stack Worked Example
For a $10 million project, assume $6 million of senior debt at 7 percent, $1.5 million of mezzanine financing at 12 percent, and $1 million of preferred equity at 15 percent. The three layers provide $8.5 million and cost $750,000 per year, producing an 8.82 percent simple blended annual cost and leaving a $1.5 million common equity funding gap.
Choosing Capital Cost Inputs and Reading the Result
Enter the contractual annual cost for each layer only when it is a reasonable proxy for that capital's economics. Convert payment in kind interest, preferred returns, fees, and participation into comparable annual costs when possible, then stress test them separately. A lower blended percentage does not by itself make a stack safer because maturity dates, intercreditor rights, cash pay requirements, and repayment priority can control the outcome.