AEO
American Eagle Outfitters Inc
Price:  
11.10 
USD
Volume:  
4,357,403.00
United States | Specialty Retail
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AEO WACC - Weighted Average Cost of Capital

The WACC of American Eagle Outfitters Inc (AEO) is 5.9%.

The Cost of Equity of American Eagle Outfitters Inc (AEO) is 8.65%.
The Cost of Debt of American Eagle Outfitters Inc (AEO) is 4.50%.

Range Selected
Cost of equity 7.30% - 10.00% 8.65%
Tax rate 27.20% - 28.70% 27.95%
Cost of debt 4.50% - 4.50% 4.50%
WACC 5.3% - 6.6% 5.9%
WACC

AEO 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 0.92
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.30% 10.00%
Tax rate 27.20% 28.70%
Debt/Equity ratio 1 1
Cost of debt 4.50% 4.50%
After-tax WACC 5.3% 6.6%
Selected WACC 5.9%

AEO'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 AEO:

cost_of_equity (8.65%) = 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.