AIR
AAR Corp
Price:  
74.84 
USD
Volume:  
570,520.00
United States | Aerospace & Defense
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AAR WACC - Weighted Average Cost of Capital

The WACC of AAR Corp (AIR) is 8.9%.

The Cost of Equity of AAR Corp (AIR) is 10.45%.
The Cost of Debt of AAR Corp (AIR) is 6.20%.

Range Selected
Cost of equity 9.00% - 11.90% 10.45%
Tax rate 23.40% - 25.50% 24.45%
Cost of debt 6.10% - 6.30% 6.20%
WACC 7.8% - 10.0% 8.9%
WACC

AAR WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.12 1.25
Additional risk adjustments 0.0% 0.5%
Cost of equity 9.00% 11.90%
Tax rate 23.40% 25.50%
Debt/Equity ratio 0.36 0.36
Cost of debt 6.10% 6.30%
After-tax WACC 7.8% 10.0%
Selected WACC 8.9%

AAR'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 AAR:

cost_of_equity (10.45%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.12) + 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.