AXL WACC - Weighted Average Cost of Capital

The WACC of American Axle & Manufacturing Holdings Inc (AXL) is 7.9%.

The Cost of Equity of American Axle & Manufacturing Holdings Inc (AXL) is 15.50%.

The Cost of Debt of American Axle & Manufacturing Holdings Inc (AXL) is 9.10%.

	Range	Selected
Cost of equity	13.50% - 17.50%	15.50%
Tax rate	25.50% - 40.00%	32.75%
Cost of debt	5.80% - 12.40%	9.10%
WACC	6.2% - 9.5%	7.9%

WACC

AXL WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	2.1	2.26

Additional risk adjustments	0.0%	0.5%
Cost of equity	13.50%	17.50%

Tax rate	25.50%	40.00%
Debt/Equity ratio	3.89	3.89
Cost of debt	5.80%	12.40%

After-tax WACC	6.2%	9.5%


Selected WACC	7.9%

AXL'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 AXL:

cost_of_equity (15.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (2.1) + 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.