CSTR
CapStar Financial Holdings Inc
Price:  
20.10 
USD
Volume:  
129,606.00
United States | Banks
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CSTR WACC - Weighted Average Cost of Capital

The WACC of CapStar Financial Holdings Inc (CSTR) is 8.6%.

The Cost of Equity of CapStar Financial Holdings Inc (CSTR) is 9.00%.
The Cost of Debt of CapStar Financial Holdings Inc (CSTR) is 5.00%.

Range Selected
Cost of equity 7.80% - 10.20% 9.00%
Tax rate 19.90% - 20.30% 20.10%
Cost of debt 5.00% - 5.00% 5.00%
WACC 7.5% - 9.8% 8.6%
WACC

CSTR WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.85 0.95
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.80% 10.20%
Tax rate 19.90% 20.30%
Debt/Equity ratio 0.07 0.07
Cost of debt 5.00% 5.00%
After-tax WACC 7.5% 9.8%
Selected WACC 8.6%

CSTR'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 CSTR:

cost_of_equity (9.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.85) + 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.