The WACC of Advantego Corporation (ADGO) is 9.0%.
| Range | Selected | |
| Cost of equity | 5.20% - 25.60% | 15.40% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 7.00% - 17.60% | 12.30% |
| WACC | 5.2% - 12.9% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -3.52 | 0.57 |
| Additional risk adjustments | 17.5% | 18.0% |
| Cost of equity | 5.20% | 25.60% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 208.92 | 208.92 |
| Cost of debt | 7.00% | 17.60% |
| After-tax WACC | 5.2% | 12.9% |
| Selected WACC | 9.0% | |
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 ADGO:
cost_of_equity (15.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-3.52) + risk_adjustments (17.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.