CFR WACC - Weighted Average Cost of Capital
The WACC of Cullen/Frost Bankers Inc (CFR) is 8.1%.
| Range | Selected | |
| Cost of equity | 8.7% - 11.5% | 10.1% |
| Tax rate | 11.8% - 14.5% | 13.15% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.2% - 9.0% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.05 | 1.18 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.7% | 11.5% |
| Tax rate | 11.8% | 14.5% |
| Debt/Equity ratio | 0.52 | 0.52 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.2% | 9.0% |
| Selected WACC | 8.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| CFR | Cullen/Frost Bankers Inc | 0.52 | 1.11 | 0.77 |
| BOKF | BOK Financial Corp | 0.22 | 0.95 | 0.8 |
| CBSH | Commerce Bancshares Inc | 0.34 | 0.82 | 0.64 |
| FCNCA | First Citizens BancShares Inc (Delaware) | 1.28 | 1.21 | 0.58 |
| OZK | Bank Ozk | 0.08 | 1.15 | 1.08 |
| PB | Prosperity Bancshares Inc | 0.49 | 0.71 | 0.5 |
| PNFP | Pinnacle Financial Partners Inc | 0.07 | 1.43 | 1.35 |
| SSB | South State Corp | 0.09 | 1.07 | 0.99 |
| UMPQ | Umpqua Holdings Corp | 0.42 | 0.95 | 0.7 |
| WBS | Webster Financial Corp | 0.13 | 1.5 | 1.35 |
| Low | High | |
| Unlevered beta | 0.74 | 0.87 |
| Relevered beta | 1.07 | 1.27 |
| Adjusted relevered beta | 1.05 | 1.18 |
CFR'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 CFR:
cost_of_equity (10.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.05) + 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.