CVS
CVS Health Corp
Price:  
62.53 
USD
Volume:  
10,775,639.00
United States | Health Care Providers & Services
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CVS WACC - Weighted Average Cost of Capital

The WACC of CVS Health Corp (CVS) is 6.7%.

The Cost of Equity of CVS Health Corp (CVS) is 8.85%.
The Cost of Debt of CVS Health Corp (CVS) is 5.50%.

Range Selected
Cost of equity 7.00% - 10.70% 8.85%
Tax rate 25.30% - 25.60% 25.45%
Cost of debt 4.00% - 7.00% 5.50%
WACC 5.2% - 8.2% 6.7%
WACC

CVS WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.69 1.05
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.00% 10.70%
Tax rate 25.30% 25.60%
Debt/Equity ratio 0.84 0.84
Cost of debt 4.00% 7.00%
After-tax WACC 5.2% 8.2%
Selected WACC 6.7%

CVS'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 CVS:

cost_of_equity (8.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.69) + 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.