The WACC of Arrow Resources Development Inc (ARWD) is 3.8%.
| Range | Selected | |
| Cost of equity | 3.20% - 752.40% | 377.80% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.7% - 3.9% | 3.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -57.2 | 86.61 |
| Additional risk adjustments | 262.5% | 263.0% |
| Cost of equity | 3.20% | 752.40% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 3073.43 | 3073.43 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.7% | 3.9% |
| Selected WACC | 3.8% | |
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 ARWD:
cost_of_equity (377.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-57.2) + risk_adjustments (262.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.