The WACC of Consolidated Edison Inc (ED) is 4.9%.
| Range | Selected | |
| Cost of equity | 5.10% - 6.30% | 5.70% |
| Tax rate | 15.70% - 18.60% | 17.15% |
| Cost of debt | 4.10% - 4.90% | 4.50% |
| WACC | 4.4% - 5.3% | 4.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.15 | 0.16 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.10% | 6.30% |
| Tax rate | 15.70% | 18.60% |
| Debt/Equity ratio | 0.71 | 0.71 |
| Cost of debt | 4.10% | 4.90% |
| After-tax WACC | 4.4% | 5.3% |
| Selected WACC | 4.9% | |
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 ED:
cost_of_equity (5.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.15) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.