The WACC of Popular Inc (BPOP) is 9.2%.
Range | Selected | |
Cost of equity | 8.4% - 11.2% | 9.8% |
Tax rate | 19.2% - 21.1% | 20.15% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 7.9% - 10.5% | 9.2% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.98 | 1.14 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.4% | 11.2% |
Tax rate | 19.2% | 21.1% |
Debt/Equity ratio | 0.11 | 0.11 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 7.9% | 10.5% |
Selected WACC | 9.2% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
BPOP | Popular Inc | 0.11 | 1.04 | 0.95 |
BOKF | BOK Financial Corp | 0.22 | 0.95 | 0.81 |
CIT | CIT Group Inc | 0.9 | 1.47 | 0.86 |
FCNCA | First Citizens BancShares Inc (Delaware) | 1.28 | 1.21 | 0.6 |
PBCT | People's United Financial Inc | 0.17 | 0.95 | 0.84 |
PNFP | Pinnacle Financial Partners Inc | 0.07 | 1.43 | 1.35 |
SNV | Synovus Financial Corp | 0.24 | 1.59 | 1.33 |
TCF | TCF Financial Corp | 0.19 | 1.92 | 1.67 |
VLY | Valley National Bancorp | 0.14 | 1.02 | 0.91 |
WBS | Webster Financial Corp | 0.13 | 1.5 | 1.36 |
Low | High | |
Unlevered beta | 0.89 | 1.1 |
Relevered beta | 0.97 | 1.21 |
Adjusted relevered beta | 0.98 | 1.14 |
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 BPOP:
cost_of_equity (9.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.98) + 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.