CDK
CDK Global Inc
Price:  
54.76 
USD
Volume:  
16,827,000.00
United States | Software
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CDK WACC - Weighted Average Cost of Capital

The WACC of CDK Global Inc (CDK) is 7.7%.

The Cost of Equity of CDK Global Inc (CDK) is 8.85%.
The Cost of Debt of CDK Global Inc (CDK) is 4.55%.

Range Selected
Cost of equity 7.70% - 10.00% 8.85%
Tax rate 28.30% - 29.40% 28.85%
Cost of debt 4.50% - 4.60% 4.55%
WACC 6.8% - 8.7% 7.7%
WACC

CDK WACC calculation

Category Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 1.06 1.12
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.70% 10.00%
Tax rate 28.30% 29.40%
Debt/Equity ratio 0.25 0.25
Cost of debt 4.50% 4.60%
After-tax WACC 6.8% 8.7%
Selected WACC 7.7%

CDK'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 CDK:

cost_of_equity (8.85%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.06) + 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.