ALK WACC - Weighted Average Cost of Capital

The WACC of Alaska Air Group Inc (ALK) is 6.6%.

The Cost of Equity of Alaska Air Group Inc (ALK) is 9.50%.

The Cost of Debt of Alaska Air Group Inc (ALK) is 4.55%.

	Range	Selected
Cost of equity	7.70% - 11.30%	9.50%
Tax rate	27.00% - 27.40%	27.20%
Cost of debt	4.20% - 4.90%	4.55%
WACC	5.5% - 7.7%	6.6%

WACC

ALK WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.83	1.15

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.70%	11.30%

Tax rate	27.00%	27.40%
Debt/Equity ratio	0.86	0.86
Cost of debt	4.20%	4.90%

After-tax WACC	5.5%	7.7%


Selected WACC	6.6%

ALK'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 ALK:

cost_of_equity (9.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.83) + 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.