FIVE
Five Below Inc
Price:  
116.1 
USD
Volume:  
2,219,788
United States | Specialty Retail

FIVE WACC - Weighted Average Cost of Capital

The WACC of Five Below Inc (FIVE) is 5.9%.

The Cost of Equity of Five Below Inc (FIVE) is 8.5%.
The Cost of Debt of Five Below Inc (FIVE) is 4.5%.

RangeSelected
Cost of equity6.7% - 10.3%8.5%
Tax rate24.4% - 24.8%24.6%
Cost of debt4.5% - 4.5%4.5%
WACC5.0% - 6.8%5.9%
WACC

FIVE WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.610.97
Additional risk adjustments0.0%0.5%
Cost of equity6.7%10.3%
Tax rate24.4%24.8%
Debt/Equity ratio
11
Cost of debt4.5%4.5%
After-tax WACC5.0%6.8%
Selected WACC5.9%

FIVE'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 FIVE:

cost_of_equity (8.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.61) + 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.