The WACC of CMC Materials Inc (CCMP) is 8.9%.
| Range | Selected | |
| Cost of equity | 8.40% - 11.40% | 9.90% |
| Tax rate | 20.60% - 21.90% | 21.25% |
| Cost of debt | 4.20% - 4.50% | 4.35% |
| WACC | 7.6% - 10.1% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.23 | 1.37 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.40% | 11.40% |
| Tax rate | 20.60% | 21.90% |
| Debt/Equity ratio | 0.18 | 0.18 |
| Cost of debt | 4.20% | 4.50% |
| After-tax WACC | 7.6% | 10.1% |
| Selected WACC | 8.9% | |
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 CCMP:
cost_of_equity (9.90%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.23) + 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.