The WACC of Ameresco Inc (AMRC) is 12.9%.
| Range | Selected | |
| Cost of equity | 17.40% - 22.60% | 20.00% |
| Tax rate | 5.10% - 27.70% | 16.40% |
| Cost of debt | 7.10% - 15.60% | 11.35% |
| WACC | 10.5% - 15.3% | 12.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 2.94 | 3.17 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 17.40% | 22.60% |
| Tax rate | 5.10% | 27.70% |
| Debt/Equity ratio | 1.85 | 1.85 |
| Cost of debt | 7.10% | 15.60% |
| After-tax WACC | 10.5% | 15.3% |
| Selected WACC | 12.9% | |
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 (20.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (2.94) + 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.