The WACC of Abbvie Inc (ABBV) is 7.3%.
Range | Selected | |
Cost of equity | 6.6% - 9.3% | 7.95% |
Tax rate | 14.0% - 18.0% | 16% |
Cost of debt | 4.0% - 5.1% | 4.55% |
WACC | 6.1% - 8.5% | 7.3% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.59 | 0.8 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.6% | 9.3% |
Tax rate | 14.0% | 18.0% |
Debt/Equity ratio | 0.21 | 0.21 |
Cost of debt | 4.0% | 5.1% |
After-tax WACC | 6.1% | 8.5% |
Selected WACC | 7.3% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
ABBV | Abbvie Inc | 0.21 | 0.39 | 0.33 |
ALXN | Alexion Pharmaceuticals Inc | 0.07 | 1.25 | 1.18 |
BBIO | BridgeBio Pharma Inc | 0.34 | 1.05 | 0.81 |
BIIB | Biogen Inc | 0.34 | 0.41 | 0.32 |
BMRN | Biomarin Pharmaceutical Inc | 0.05 | 0.55 | 0.53 |
CHRS | Coherus BioSciences Inc | 3.33 | 1.3 | 0.34 |
EXAS | Exact Sciences Corp | 0.24 | 0.35 | 0.29 |
MYGN | Myriad Genetics Inc | 0.1 | 0.83 | 0.76 |
OPK | OPKO Health Inc | 0.5 | 0.16 | 0.11 |
VRTX | Vertex Pharmaceuticals Inc | 0 | 0.7 | 0.7 |
Low | High | |
Unlevered beta | 0.34 | 0.6 |
Relevered beta | 0.39 | 0.7 |
Adjusted relevered beta | 0.59 | 0.8 |
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 Abbvie:
cost_of_equity (7.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.59) + 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.