The WACC of Ballantyne Strong Inc (BTN) is 9.2%.
| Range | Selected | |
| Cost of equity | 8.00% - 11.50% | 9.75% |
| Tax rate | 19.90% - 25.80% | 22.85% |
| Cost of debt | 7.00% - 8.00% | 7.50% |
| WACC | 7.6% - 10.7% | 9.2% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.76 | 1.06 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.00% | 11.50% |
| Tax rate | 19.90% | 25.80% |
| Debt/Equity ratio | 0.17 | 0.17 |
| Cost of debt | 7.00% | 8.00% |
| After-tax WACC | 7.6% | 10.7% |
| Selected WACC | 9.2% | |
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 BTN:
cost_of_equity (9.75%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.76) + 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.