EFBI WACC - Weighted Average Cost of Capital
The WACC of Eagle Financial Bancorp Inc (EFBI) is 5.2%.
| Range | Selected | |
| Cost of equity | 5.5% - 7.5% | 6.5% |
| Tax rate | 22.1% - 22.3% | 22.2% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.7% - 5.7% | 5.2% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.54 | 0.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.5% | 7.5% |
| Tax rate | 22.1% | 22.3% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.7% | 5.7% |
| Selected WACC | 5.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| EFBI | Eagle Financial Bancorp Inc | 1 | 0.24 | 0.14 |
| CIBN | Community Investors Bancorp Inc | 0.59 | 0.04 | 0.02 |
| EQFN | Equitable Financial Corp | 0.01 | 0.19 | 0.19 |
| LOGN | Logansport Financial Corp | 0.59 | 0.07 | 0.05 |
| PPSF | Peoples Sidney Financial Corp | 0.05 | -0.52 | -0.5 |
| VRTA | Vestin Realty Mortgage I Inc | 0.74 | 1.67 | 1.06 |
| Low | High | |
| Unlevered beta | 0.05 | 0.14 |
| Relevered beta | 0.31 | 0.45 |
| Adjusted relevered beta | 0.54 | 0.63 |
EFBI'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 EFBI:
cost_of_equity (6.50%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.54) + 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.