FETM WACC - Weighted Average Cost of Capital
The WACC of Fentura Financial Inc (FETM) is 6.6%.
| Range | Selected | |
| Cost of equity | 5.7% - 8.3% | 7% |
| Tax rate | 20.2% - 20.2% | 20.2% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.5% - 7.8% | 6.6% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.59 | 0.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.7% | 8.3% |
| Tax rate | 20.2% | 20.2% |
| Debt/Equity ratio | 0.14 | 0.14 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.5% | 7.8% |
| Selected WACC | 6.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FETM | Fentura Financial Inc | 0.14 | 0.18 | 0.17 |
| BNCC | BNCCorp Inc | 0.15 | 0.29 | 0.26 |
| CIZN | Citizens Holding Co | 6.55 | 0.45 | 0.07 |
| EMYB | Embassy Bancorp Inc | 0.18 | 0.09 | 0.08 |
| ENBP | ENB Financial Corp | 0.42 | 0.07 | 0.05 |
| NWYF | Northway Financial Inc | 1.06 | 1.7 | 0.92 |
| OVBC | Ohio Valley Banc Corp | 0.06 | -0.02 | -0.02 |
| QNBC | QNB Corp | 0.71 | -0.27 | -0.17 |
| SAL | Salisbury Bancorp Inc | 0.22 | 0.34 | 0.29 |
| SBFG | SB Financial Group Inc | 0.32 | 0.21 | 0.17 |
| Low | High | |
| Unlevered beta | 0.08 | 0.17 |
| Relevered beta | 0.39 | 0.69 |
| Adjusted relevered beta | 0.59 | 0.79 |
FETM'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 FETM:
cost_of_equity (7.00%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.59) + 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.