The WACC of Alaska Communications Systems Group Inc (ALSK) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.20% - 7.30% | 6.25% |
| Tax rate | 36.50% - 37.90% | 37.20% |
| Cost of debt | 7.30% - 9.10% | 8.20% |
| WACC | 4.9% - 6.5% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.48 | 0.59 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.20% | 7.30% |
| Tax rate | 36.50% | 37.90% |
| Debt/Equity ratio | 0.91 | 0.91 |
| Cost of debt | 7.30% | 9.10% |
| After-tax WACC | 4.9% | 6.5% |
| Selected WACC | 5.7% | |
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 ALSK:
cost_of_equity (6.25%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.48) + 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.