The WACC of Big Lots Inc (BIG) is 46.3%.
| Range | Selected | |
| Cost of equity | 118.70% - 209.80% | 164.25% |
| Tax rate | 23.50% - 24.10% | 23.80% |
| Cost of debt | 7.00% - 113.80% | 60.40% |
| WACC | 5.8% - 86.8% | 46.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 24.96 | 36.59 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 118.70% | 209.80% |
| Tax rate | 23.50% | 24.10% |
| Debt/Equity ratio | 236.88 | 236.88 |
| Cost of debt | 7.00% | 113.80% |
| After-tax WACC | 5.8% | 86.8% |
| Selected WACC | 46.3% | |
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 BIG:
cost_of_equity (164.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (24.96) + 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.