The WACC of Entercom Communications Corp (ETM) is 9.2%.
| Range | Selected | |
| Cost of equity | 6.30% - 9.90% | 8.10% |
| Tax rate | 19.30% - 26.60% | 22.95% |
| Cost of debt | 5.20% - 20.60% | 12.90% |
| WACC | 4.8% - 13.6% | 9.2% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.74 | 1.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.30% | 9.90% |
| Tax rate | 19.30% | 26.60% |
| Debt/Equity ratio | 2.39 | 2.39 |
| Cost of debt | 5.20% | 20.60% |
| After-tax WACC | 4.8% | 13.6% |
| Selected WACC | 9.2% | |
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 ETM:
cost_of_equity (8.10%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.74) + 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.