CERC WACC - Weighted Average Cost of Capital
The WACC of Cerecor Inc (CERC) is 6.7%.
| Range | Selected | |
| Cost of equity | 6.5% - 10.3% | 8.4% |
| Tax rate | 1.1% - 1.7% | 1.4% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.7% - 7.6% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.78 | 1.17 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.5% | 10.3% |
| Tax rate | 1.1% | 1.7% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.7% | 7.6% |
| Selected WACC | 6.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| CERC | Cerecor Inc | 0.06 | 1.44 | 1.36 |
| ATE.TO | Antibe Therapeutics Inc | 0.85 | -0.16 | -0.09 |
| BMY | Bristol-Myers Squibb Co | 0.52 | 0.15 | 0.1 |
| CBAY | Cymabay Therapeutics Inc | 0.03 | 0.93 | 0.91 |
| EYPT | EyePoint Pharmaceuticals Inc | 1.11 | 2.14 | 1.02 |
| ITRM | Iterum Therapeutics PLC | 1.01 | 1.54 | 0.78 |
| KLDO | Kaleido Biosciences Inc | 504511.62 | -658.43 | 0 |
| LLY | Eli Lilly and Co | 0.04 | 0.78 | 0.75 |
| MRK | Merck & Co Inc | 0.18 | 0.4 | 0.34 |
| RDHL | Redhill Biopharma Ltd | 0.08 | 1.25 | 1.17 |
| XERS | Xeris Pharmaceuticals Inc | 0.28 | 1.19 | 0.93 |
| Low | High | |
| Unlevered beta | 0.75 | 0.91 |
| Relevered beta | 0.67 | 1.25 |
| Adjusted relevered beta | 0.78 | 1.17 |
CERC'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 CERC:
cost_of_equity (8.40%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.78) + 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.