The WACC of Clovis Oncology Inc (CLVS) is 7.0%.
| Range | Selected | |
| Cost of equity | 55.30% - 113.60% | 84.45% |
| Tax rate | 0.20% - 0.20% | 0.20% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 5.0% - 9.0% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 10.22 | 18.07 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 55.30% | 113.60% |
| Tax rate | 0.20% | 0.20% |
| Debt/Equity ratio | 52.27 | 52.27 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 5.0% | 9.0% |
| Selected WACC | 7.0% | |
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 CLVS:
cost_of_equity (84.45%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (10.22) + 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.