The WACC of Amalgamated Bank (AMAL) is 8.2%.
Range | Selected | |
Cost of equity | 8.4% - 10.7% | 9.55% |
Tax rate | 25.4% - 26.1% | 25.75% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 7.3% - 9.1% | 8.2% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.98 | 1.05 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.4% | 10.7% |
Tax rate | 25.4% | 26.1% |
Debt/Equity ratio | 0.32 | 0.32 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 7.3% | 9.1% |
Selected WACC | 8.2% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
AMAL | Amalgamated Bank | 0.32 | 1.07 | 0.86 |
CBSH | Commerce Bancshares Inc | 0.34 | 0.85 | 0.68 |
CFG | Citizens Financial Group Inc | 0.59 | 1.27 | 0.88 |
FITB | Fifth Third Bancorp | 0.65 | 1.19 | 0.8 |
FRC | First Republic Bank | 1.99 | 1.01 | 0.41 |
KEY | KeyCorp | 0.71 | 1.5 | 0.98 |
MTB | M&T Bank Corp | 0.42 | 1 | 0.76 |
PNC | PNC Financial Services Group Inc | 0.51 | 1.04 | 0.75 |
RF | Regions Financial Corp | 0.18 | 1.17 | 1.03 |
SIVB | SVB Financial Group | 0.95 | 1.69 | 0.99 |
Low | High | |
Unlevered beta | 0.79 | 0.87 |
Relevered beta | 0.97 | 1.07 |
Adjusted relevered beta | 0.98 | 1.05 |
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 AMAL:
cost_of_equity (9.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.98) + 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.