BPOP WACC - Weighted Average Cost of Capital
The WACC of Popular Inc (BPOP) is 9.3%.
| Range | Selected | |
| Cost of equity | 8.5% - 11.3% | 9.9% |
| Tax rate | 19.2% - 21.1% | 20.15% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 8.0% - 10.6% | 9.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.01 | 1.16 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.5% | 11.3% |
| Tax rate | 19.2% | 21.1% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 8.0% | 10.6% |
| Selected WACC | 9.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| BPOP | Popular Inc | 0.12 | 1.07 | 0.98 |
| BOKF | BOK Financial Corp | 0.22 | 0.99 | 0.85 |
| CIT | CIT Group Inc | 0.9 | 1.47 | 0.86 |
| FCNCA | First Citizens BancShares Inc (Delaware) | 1.26 | 1.24 | 0.62 |
| PBCT | People's United Financial Inc | 0.17 | 0.95 | 0.84 |
| PNFP | Pinnacle Financial Partners Inc | 0.07 | 1.49 | 1.41 |
| SNV | Synovus Financial Corp | 0.25 | 1.63 | 1.36 |
| TCF | TCF Financial Corp | 0.19 | 1.92 | 1.67 |
| VLY | Valley National Bancorp | 0.15 | 1.08 | 0.97 |
| WBS | Webster Financial Corp | 0.13 | 1.54 | 1.4 |
| Low | High | |
| Unlevered beta | 0.92 | 1.13 |
| Relevered beta | 1.01 | 1.24 |
| Adjusted relevered beta | 1.01 | 1.16 |
BPOP'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 BPOP:
cost_of_equity (9.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.01) + 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.