The WACC of Cleveland-Cliffs Inc (CLF) is 8.9%.
Range | Selected | |
Cost of equity | 13.9% - 20.4% | 17.15% |
Tax rate | 24.3% - 24.8% | 24.55% |
Cost of debt | 5.8% - 7.0% | 6.4% |
WACC | 7.5% - 10.3% | 8.9% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 2.19 | 2.78 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 13.9% | 20.4% |
Tax rate | 24.3% | 24.8% |
Debt/Equity ratio | 2.03 | 2.03 |
Cost of debt | 5.8% | 7.0% |
After-tax WACC | 7.5% | 10.3% |
Selected WACC | 8.9% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
CLF | Cleveland-Cliffs Inc | 2.03 | 1.88 | 0.74 |
AMR | Alpha Metallurgical Resources Inc | 0 | 1.73 | 1.72 |
ATI | Allegheny Technologies Inc | 0.15 | 1.87 | 1.67 |
CAD.V | Colonial Coal International Corp | 0 | 1.32 | 1.32 |
CG.TO | Centerra Gold Inc | 0.01 | 1.37 | 1.35 |
CSO.V | Corsa Coal Corp | 1.3 | 1.51 | 0.77 |
HCC | Warrior Met Coal Inc | 0.08 | 1.71 | 1.62 |
METC | Ramaco Resources Inc | 0.18 | -0.02 | -0.01 |
PVMCF | Pine Valley Mining Corp | 0.34 | 0 | 0 |
TECK | Teck Resources Ltd | 0.36 | 2.02 | 1.59 |
Low | High | |
Unlevered beta | 1.1 | 1.45 |
Relevered beta | 2.78 | 3.66 |
Adjusted relevered beta | 2.19 | 2.78 |
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 CLF:
cost_of_equity (17.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (2.19) + 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.