AVEO WACC - Weighted Average Cost of Capital
The WACC of Aveo Pharmaceuticals Inc (AVEO) is 7.3%.
| Range | Selected | |
| Cost of equity | 5.8% - 8.8% | 7.3% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 7.0% - 12.6% | 9.8% |
| WACC | 5.8% - 8.8% | 7.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.43 | 0.7 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.8% | 8.8% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.07 | 0.07 |
| Cost of debt | 7.0% | 12.6% |
| After-tax WACC | 5.8% | 8.8% |
| Selected WACC | 7.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| AVEO | Aveo Pharmaceuticals Inc | 0.07 | 1 | 0.95 |
| AGTC | Applied Genetic Technologies Corp | 0.69 | 1.56 | 1.04 |
| APTX | Aptinyx Inc | 3.83 | 0.17 | 0.05 |
| GRCL | Gracell Biotechnologies Inc | 0.02 | 1.99 | 1.96 |
| GRTX | Galera Therapeutics Inc | 88.96 | 0.41 | 0.01 |
| IFRX | Inflarx NV | 0.01 | 1.41 | 1.4 |
| MTCR | Metacrine, Inc. | 0.63 | 0.2 | 0.14 |
| OBSV | Obseva SA | 3.13 | 0.43 | 0.13 |
| ONCS | OncoSec Medical Inc | 0.57 | -0.12 | -0.08 |
| RVX.TO | Resverlogix Corp | 0.98 | 0.43 | 0.25 |
| Low | High | |
| Unlevered beta | 0.14 | 0.53 |
| Relevered beta | 0.15 | 0.55 |
| Adjusted relevered beta | 0.43 | 0.7 |
AVEO's CAPM model and how its cost of Equity is calculated
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 AVEO:
cost_of_equity (7.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.43) + 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.