FL WACC - Weighted Average Cost of Capital
The WACC of Foot Locker Inc (FL) is 6.7%.
| Range | Selected | |
| Cost of equity | 6.3% - 8.5% | 7.4% |
| Tax rate | 31.8% - 34.5% | 33.15% |
| Cost of debt | 4.6% - 5.7% | 5.15% |
| WACC | 5.8% - 7.7% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.53 | 0.65 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.3% | 8.5% |
| Tax rate | 31.8% | 34.5% |
| Debt/Equity ratio | 0.2 | 0.2 |
| Cost of debt | 4.6% | 5.7% |
| After-tax WACC | 5.8% | 7.7% |
| Selected WACC | 6.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FL | Foot Locker Inc | 0.2 | 0.91 | 0.8 |
| BURL | Burlington Stores Inc | 0.1 | 0.65 | 0.61 |
| CAL | Caleres Inc | 0.36 | 0.51 | 0.41 |
| CHS | Chico's FAS Inc | 0.05 | 0.08 | 0.08 |
| DBI | Designer Brands Inc | 2.8 | 1.23 | 0.43 |
| DESTQ | Destination Maternity Corp | 32716.8 | -0.23 | 0 |
| EXPR | Express Inc | 32.62 | 1.25 | 0.06 |
| GES | Guess? Inc | 0.86 | 0.6 | 0.39 |
| GPS | Gap Inc | 0.16 | 1.43 | 1.3 |
| SMRTQ | Stein Mart Inc | 188.09 | -0.34 | 0 |
| Low | High | |
| Unlevered beta | 0.26 | 0.42 |
| Relevered beta | 0.3 | 0.48 |
| Adjusted relevered beta | 0.53 | 0.65 |
FL'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 FL:
cost_of_equity (7.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.53) + 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.