The WACC of Ballistic Recovery Systems Inc (BRSI) is 5.4%.
| Range | Selected | |
| Cost of equity | 3.10% - 4,552.30% | 2,277.70% |
| Tax rate | 34.30% - 37.80% | 36.05% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 4.6% - 6.1% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.37 | 811.87 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 3.10% | 4,552.30% |
| Tax rate | 34.30% | 37.80% |
| Debt/Equity ratio | 2574.35 | 2574.35 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 4.6% | 6.1% |
| Selected WACC | 5.4% | |
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 BRSI:
cost_of_equity (2,277.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.37) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.