CTSH
Cognizant Technology Solutions Corp
Price:  
81.81 
USD
Volume:  
3,263,853.00
United States | IT Services
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Cognizant WACC - Weighted Average Cost of Capital

The WACC of Cognizant Technology Solutions Corp (CTSH) is 7.7%.

The Cost of Equity of Cognizant Technology Solutions Corp (CTSH) is 7.80%.
The Cost of Debt of Cognizant Technology Solutions Corp (CTSH) is 4.40%.

Range Selected
Cost of equity 6.80% - 8.80% 7.80%
Tax rate 24.20% - 24.40% 24.30%
Cost of debt 4.30% - 4.50% 4.40%
WACC 6.7% - 8.6% 7.7%
WACC

Cognizant WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.63 0.69
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.80% 8.80%
Tax rate 24.20% 24.40%
Debt/Equity ratio 0.02 0.02
Cost of debt 4.30% 4.50%
After-tax WACC 6.7% 8.6%
Selected WACC 7.7%

Cognizant'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 Cognizant:

cost_of_equity (7.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.63) + 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.