The WACC of Ford Motor Co (F) is 11.0%.
| Range | Selected | |
| Cost of equity | 10.10% - 15.60% | 12.85% |
| Tax rate | 12.30% - 16.00% | 14.15% |
| Cost of debt | 4.20% - 20.90% | 12.55% |
| WACC | 5.0% - 17.1% | 11.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.34 | 1.92 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.10% | 15.60% |
| Tax rate | 12.30% | 16.00% |
| Debt/Equity ratio | 3.88 | 3.88 |
| Cost of debt | 4.20% | 20.90% |
| After-tax WACC | 5.0% | 17.1% |
| Selected WACC | 11.0% | |
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 Ford:
cost_of_equity (12.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.34) + 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.