AA
Alcoa Corp
Price:  
29.79 
USD
Volume:  
7,736,918.00
United States | Metals & Mining
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Alcoa WACC - Weighted Average Cost of Capital

The WACC of Alcoa Corp (AA) is 7.7%.

The Cost of Equity of Alcoa Corp (AA) is 8.95%.
The Cost of Debt of Alcoa Corp (AA) is 5.55%.

Range Selected
Cost of equity 7.40% - 10.50% 8.95%
Tax rate 26.20% - 27.00% 26.60%
Cost of debt 4.60% - 6.50% 5.55%
WACC 6.4% - 9.1% 7.7%
WACC

Alcoa WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.76 1
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.40% 10.50%
Tax rate 26.20% 27.00%
Debt/Equity ratio 0.32 0.32
Cost of debt 4.60% 6.50%
After-tax WACC 6.4% 9.1%
Selected WACC 7.7%

Alcoa's CAPM model and how its cost of Equity is calculated

The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.

This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.

Here’s how we figure out the cost of equity for Alcoa:

cost_of_equity (8.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.76) + risk_adjustments (0.25%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.