The WACC of ITT Educational Services Inc (ESINQ) is 5.0%.
| Range | Selected | |
| Cost of equity | 151,376.00% - 204,167.00% | 177,771.50% |
| Tax rate | 39.30% - 40.00% | 39.65% |
| Cost of debt | 4.90% - 5.60% | 5.25% |
| WACC | 4.5% - 5.5% | 5.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 32907 | 36457.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 151,376.00% | 204,167.00% |
| Tax rate | 39.30% | 40.00% |
| Debt/Equity ratio | 97659.86 | 97659.86 |
| Cost of debt | 4.90% | 5.60% |
| After-tax WACC | 4.5% | 5.5% |
| Selected WACC | 5.0% | |
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 ESINQ:
cost_of_equity (177,771.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (32907) + 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.