EW WACC - Weighted Average Cost of Capital
The WACC of Edwards Lifesciences Corp (EW) is 7.0%.
| Range | Selected | |
| Cost of equity | 6.0% - 8.1% | 7.05% |
| Tax rate | 10.7% - 11.3% | 11% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 5.9% - 8.0% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.46 | 0.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.0% | 8.1% |
| Tax rate | 10.7% | 11.3% |
| Debt/Equity ratio | 0.01 | 0.01 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 5.9% | 8.0% |
| Selected WACC | 7.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| EW | Edwards Lifesciences Corp | 0.01 | 0.53 | 0.52 |
| BAX | Baxter International Inc | 0.83 | 0.46 | 0.26 |
| BSX | Boston Scientific Corp | 0.07 | 0.86 | 0.81 |
| CNMD | Conmed Corp | 0.51 | 0.28 | 0.19 |
| DXCM | Dexcom Inc | 0.08 | 1.26 | 1.18 |
| HOLX | Hologic Inc | 0.2 | -0.25 | -0.21 |
| RMD | Resmed Inc | 0.02 | 0.71 | 0.7 |
| STE | Steris plc | 0.14 | 0.18 | 0.16 |
| TFX | Teleflex Inc | 0.3 | 0.23 | 0.18 |
| ZBH | Zimmer Biomet Holdings Inc | 0.33 | 0.24 | 0.19 |
| Low | High | |
| Unlevered beta | 0.19 | 0.37 |
| Relevered beta | 0.19 | 0.37 |
| Adjusted relevered beta | 0.46 | 0.58 |
EW'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 EW:
cost_of_equity (7.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.46) + 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.