The WACC of BIOLASE Inc (BIOL) is 9.7%.
| Range | Selected | |
| Cost of equity | 5.40% - 13.30% | 9.35% |
| Tax rate | 0.30% - 0.40% | 0.35% |
| Cost of debt | 7.00% - 12.50% | 9.75% |
| WACC | 6.9% - 12.5% | 9.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.98 | 0.44 |
| Additional risk adjustments | 6.0% | 6.5% |
| Cost of equity | 5.40% | 13.30% |
| Tax rate | 0.30% | 0.40% |
| Debt/Equity ratio | 46.82 | 46.82 |
| Cost of debt | 7.00% | 12.50% |
| After-tax WACC | 6.9% | 12.5% |
| Selected WACC | 9.7% | |
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 BIOL:
cost_of_equity (9.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.98) + risk_adjustments (6.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.