ALSN
Allison Transmission Holdings Inc
Price:  
94.66 
USD
Volume:  
1,359,755.00
United States | Machinery
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ALSN WACC - Weighted Average Cost of Capital

The WACC of Allison Transmission Holdings Inc (ALSN) is 8.0%.

The Cost of Equity of Allison Transmission Holdings Inc (ALSN) is 9.25%.
The Cost of Debt of Allison Transmission Holdings Inc (ALSN) is 4.75%.

Range Selected
Cost of equity 7.70% - 10.80% 9.25%
Tax rate 18.60% - 20.30% 19.45%
Cost of debt 4.70% - 4.80% 4.75%
WACC 6.8% - 9.2% 8.0%
WACC

ALSN WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.82 1.06
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.70% 10.80%
Tax rate 18.60% 20.30%
Debt/Equity ratio 0.3 0.3
Cost of debt 4.70% 4.80%
After-tax WACC 6.8% 9.2%
Selected WACC 8.0%

ALSN'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 ALSN:

cost_of_equity (9.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.82) + 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.