The WACC of 4 Less Group Inc (FLES) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.10% - 62.20% | 33.65% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 7.00% - 8.50% | 7.75% |
| WACC | 5.2% - 6.2% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -11.8 | 0.33 |
| Additional risk adjustments | 55.5% | 56.0% |
| Cost of equity | 5.10% | 62.20% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 15420.03 | 15420.03 |
| Cost of debt | 7.00% | 8.50% |
| After-tax WACC | 5.2% | 6.2% |
| Selected WACC | 5.7% | |
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 FLES:
cost_of_equity (33.65%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-11.8) + risk_adjustments (55.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.