ERKH WACC - Weighted Average Cost of Capital
The WACC of Eureka Homestead Bancorp Inc (ERKH) is 5.1%.
| Range | Selected | |
| Cost of equity | 5.6% - 7.2% | 6.4% |
| Tax rate | 20.7% - 29.1% | 24.9% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.8% - 5.4% | 5.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.37 | 0.42 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.6% | 7.2% |
| Tax rate | 20.7% | 29.1% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.8% | 5.4% |
| Selected WACC | 5.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ERKH | Eureka Homestead Bancorp Inc | 0.99 | 0.22 | 0.13 |
| AGM | Federal Agricultural Mortgage Corp | 13.89 | 0.82 | 0.07 |
| ATAX | America First Multifamily Investors LP | 2.7 | 0.64 | 0.21 |
| CIBN | Community Investors Bancorp Inc | 0.59 | 0.04 | 0.03 |
| CNNB | Cincinnati Bancorp Inc | 0.04 | 0.02 | 0.02 |
| FNFI | First Niles Financial Inc | 0.01 | 0.08 | 0.08 |
| LOGN | Logansport Financial Corp | 0.59 | 0.06 | 0.04 |
| NYCB | New York Community Bancorp Inc | 0.46 | 0.66 | 0.49 |
| PPSF | Peoples Sidney Financial Corp | 0.05 | -0.52 | -0.5 |
| SFBI | SFSB Inc | 3.26 | 1.59 | 0.46 |
| VRTA | Vestin Realty Mortgage I Inc | 0.74 | 1.67 | 1.07 |
| Low | High | |
| Unlevered beta | 0.07 | 0.13 |
| Relevered beta | 0.06 | 0.13 |
| Adjusted relevered beta | 0.37 | 0.42 |
ERKH'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 ERKH:
cost_of_equity (6.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.37) + 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.