EWBC WACC - Weighted Average Cost of Capital
The WACC of East West Bancorp Inc (EWBC) is 8.9%.
| Range | Selected | |
| Cost of equity | 7.6% - 10.3% | 8.95% |
| Tax rate | 19.0% - 20.2% | 19.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.6% - 10.2% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.82 | 0.96 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.6% | 10.3% |
| Tax rate | 19.0% | 20.2% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.6% | 10.2% |
| Selected WACC | 8.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| EWBC | East West Bancorp Inc | 0 | 1.21 | 1.21 |
| CBSH | Commerce Bancshares Inc | 0.34 | 0.82 | 0.65 |
| CFR | Cullen/Frost Bankers Inc | 0.52 | 1.11 | 0.79 |
| CMA | Comerica Inc | 0.32 | 1.21 | 0.96 |
| FCNCA | First Citizens BancShares Inc (Delaware) | 1.28 | 1.21 | 0.6 |
| FHN | First Horizon Corp (Tennessee) | 0.41 | 1.42 | 1.07 |
| PB | Prosperity Bancshares Inc | 0.49 | 0.71 | 0.51 |
| SBNY | Signature Bank | 14.79 | 1.15 | 0.09 |
| WAL | Western Alliance Bancorp | 0.36 | 1.46 | 1.13 |
| ZION | Zions Bancorporation NA | 0.58 | 1.36 | 0.93 |
| Low | High | |
| Unlevered beta | 0.73 | 0.94 |
| Relevered beta | 0.73 | 0.94 |
| Adjusted relevered beta | 0.82 | 0.96 |
EWBC'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 EWBC:
cost_of_equity (8.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.82) + 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.