The WACC of Comstock Resources Inc (CRK) is 6.9%.
| Range | Selected | |
| Cost of equity | 4.80% - 10.40% | 7.60% |
| Tax rate | 16.10% - 17.90% | 17.00% |
| Cost of debt | 7.00% - 7.50% | 7.25% |
| WACC | 5.2% - 8.6% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.13 | 0.72 |
| Additional risk adjustments | 1.5% | 2.0% |
| Cost of equity | 4.80% | 10.40% |
| Tax rate | 16.10% | 17.90% |
| Debt/Equity ratio | 0.71 | 0.71 |
| Cost of debt | 7.00% | 7.50% |
| After-tax WACC | 5.2% | 8.6% |
| Selected WACC | 6.9% | |
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 CRK:
cost_of_equity (7.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.13) + risk_adjustments (1.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.