The WACC of American Software Inc (AMSWA) is 8.7%.
Range | Selected | |
Cost of equity | 10.8% - 15.2% | 13% |
Tax rate | 8.6% - 12.0% | 10.3% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 7.7% - 9.8% | 8.7% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1.51 | 1.84 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 10.8% | 15.2% |
Tax rate | 8.6% | 12.0% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 7.7% | 9.8% |
Selected WACC | 8.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
AMSWA | American Software Inc | 1.11 | 0.38 | 0.19 |
BIGG.CN | BIGG Digital Assets Inc | 0 | 2 | 2 |
BITF.V | Bitfarms Ltd | 0.17 | 0.98 | 0.85 |
BNFT | Benefitfocus Inc | 0.52 | 1.72 | 1.17 |
CMCM | Cheetah Mobile Inc | 0.91 | 1.42 | 0.78 |
DMGI.V | Dmg Blockchain Solutions Inc | 0.23 | 1.56 | 1.29 |
ECOM | ChannelAdvisor Corp | 0 | 0.41 | 0.41 |
MITK | Mitek Systems Inc | 0.33 | 0.83 | 0.64 |
RAAS | Cloopen Group Holding Ltd | 0.05 | 1.02 | 0.98 |
RWWI | Rand Worldwide Inc | 0.01 | 0.64 | 0.64 |
SSTI | Shotspotter Inc | 0.02 | 1.11 | 1.09 |
Low | High | |
Unlevered beta | 0.78 | 0.98 |
Relevered beta | 1.76 | 2.25 |
Adjusted relevered beta | 1.51 | 1.84 |
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 AMSWA:
cost_of_equity (13.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.51) + 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.