The WACC of FAT Brands Inc (FAT) is 8.0%.
| Range | Selected | |
| Cost of equity | 5.30% - 9.00% | 7.15% |
| Tax rate | 8.60% - 13.00% | 10.80% |
| Cost of debt | 7.00% - 11.10% | 9.05% |
| WACC | 6.4% - 9.7% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.02 | 0.48 |
| Additional risk adjustments | 1.5% | 2.0% |
| Cost of equity | 5.30% | 9.00% |
| Tax rate | 8.60% | 13.00% |
| Debt/Equity ratio | 29.92 | 29.92 |
| Cost of debt | 7.00% | 11.10% |
| After-tax WACC | 6.4% | 9.7% |
| Selected WACC | 8.0% | |
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 FAT:
cost_of_equity (7.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.02) + risk_adjustments (1.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.