The WACC of Biogen Inc (BIIB) is 7.9%.
Range | Selected | |
Cost of equity | 7.7% - 10.8% | 9.25% |
Tax rate | 12.8% - 15.7% | 14.25% |
Cost of debt | 4.0% - 4.6% | 4.3% |
WACC | 6.7% - 9.0% | 7.9% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.84 | 1.06 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.7% | 10.8% |
Tax rate | 12.8% | 15.7% |
Debt/Equity ratio | 0.34 | 0.34 |
Cost of debt | 4.0% | 4.6% |
After-tax WACC | 6.7% | 9.0% |
Selected WACC | 7.9% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
BIIB | Biogen Inc | 0.34 | 0.48 | 0.37 |
ALXN | Alexion Pharmaceuticals Inc | 0.07 | 1.25 | 1.18 |
BBIO | BridgeBio Pharma Inc | 0.26 | 0.98 | 0.8 |
BMRN | Biomarin Pharmaceutical Inc | 0.06 | 0.51 | 0.48 |
EXAS | Exact Sciences Corp | 0.26 | 0.47 | 0.38 |
NTRA | Natera Inc | 0 | 0.97 | 0.97 |
NVAX | Novavax Inc | 0.22 | 1.09 | 0.92 |
OPK | OPKO Health Inc | 0.42 | 0.37 | 0.27 |
PTCT | PTC Therapeutics Inc | 0.6 | 1.54 | 1.01 |
VRTX | Vertex Pharmaceuticals Inc | 0 | 0.66 | 0.66 |
Low | High | |
Unlevered beta | 0.59 | 0.85 |
Relevered beta | 0.76 | 1.09 |
Adjusted relevered beta | 0.84 | 1.06 |
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 Biogen:
cost_of_equity (9.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.84) + 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.