The WACC of ADDvantage Technologies Group Inc (AEY) is 24.3%.
| Range | Selected | |
| Cost of equity | 8.10% - 13.60% | 10.85% |
| Tax rate | 1.60% - 3.90% | 2.75% |
| Cost of debt | 7.00% - 51.50% | 29.25% |
| WACC | 7.2% - 41.5% | 24.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.91 | 1.55 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.10% | 13.60% |
| Tax rate | 1.60% | 3.90% |
| Debt/Equity ratio | 3.52 | 3.52 |
| Cost of debt | 7.00% | 51.50% |
| After-tax WACC | 7.2% | 41.5% |
| Selected WACC | 24.3% | |
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 AEY:
cost_of_equity (10.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.91) + 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.