The WACC of Alta Equipment Group Inc (ALTG) is 14.1%.
| Range | Selected | |
| Cost of equity | 26.20% - 35.20% | 30.70% |
| Tax rate | 17.50% - 21.20% | 19.35% |
| Cost of debt | 5.80% - 23.90% | 14.85% |
| WACC | 7.4% - 20.8% | 14.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 4.86 | 5.41 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 26.20% | 35.20% |
| Tax rate | 17.50% | 21.20% |
| Debt/Equity ratio | 7.11 | 7.11 |
| Cost of debt | 5.80% | 23.90% |
| After-tax WACC | 7.4% | 20.8% |
| Selected WACC | 14.1% | |
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 ALTG:
cost_of_equity (30.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (4.86) + 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.