The WACC of Cumulus Media Inc (CMLS) is 13.2%.
| Range | Selected | |
| Cost of equity | 5.30% - 1,965.70% | 985.50% |
| Tax rate | 16.10% - 17.20% | 16.65% |
| Cost of debt | 7.70% - 23.90% | 15.80% |
| WACC | 6.5% - 19.9% | 13.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -134.36 | 239.52 |
| Additional risk adjustments | 619.5% | 620.0% |
| Cost of equity | 5.30% | 1,965.70% |
| Tax rate | 16.10% | 17.20% |
| Debt/Equity ratio | 13428.8 | 13428.8 |
| Cost of debt | 7.70% | 23.90% |
| After-tax WACC | 6.5% | 19.9% |
| Selected WACC | 13.2% | |
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 CMLS:
cost_of_equity (985.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-134.36) + risk_adjustments (619.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.