The WACC of Avaya Holdings Corp (AVYA) is 9.8%.
| Range | Selected | |
| Cost of equity | 248.30% - 364.90% | 306.60% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 6.40% - 13.60% | 10.00% |
| WACC | 6.7% - 12.9% | 9.8% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 48.82 | 59.96 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 248.30% | 364.90% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 118.74 | 118.74 |
| Cost of debt | 6.40% | 13.60% |
| After-tax WACC | 6.7% | 12.9% |
| Selected WACC | 9.8% | |
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 AVYA:
cost_of_equity (306.60%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (48.82) + 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.