The WACC of Ameresco Inc (AMRC) is 12.7%.
| Range | Selected | |
| Cost of equity | 18.60% - 23.20% | 20.90% |
| Tax rate | 5.10% - 27.70% | 16.40% |
| Cost of debt | 7.10% - 15.60% | 11.35% |
| WACC | 10.4% - 15.0% | 12.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 3.2 | 3.28 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 18.60% | 23.20% |
| Tax rate | 5.10% | 27.70% |
| Debt/Equity ratio | 2.25 | 2.25 |
| Cost of debt | 7.10% | 15.60% |
| After-tax WACC | 10.4% | 15.0% |
| Selected WACC | 12.7% | |
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 Ameresco:
cost_of_equity (20.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (3.2) + 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.