FN WACC - Weighted Average Cost of Capital
The WACC of Fabrinet (FN) is 8.5%.
| Range | Selected | |
| Cost of equity | 10.3% - 14.1% | 12.2% |
| Tax rate | 4.1% - 4.8% | 4.45% |
| Cost of debt | 4.5% - 5.4% | 4.95% |
| WACC | 7.3% - 9.6% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.41 | 1.65 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.3% | 14.1% |
| Tax rate | 4.1% | 4.8% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 4.5% | 5.4% |
| After-tax WACC | 7.3% | 9.6% |
| Selected WACC | 8.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FN | Fabrinet | 0.97 | 2.12 | 1.1 |
| BHE | Benchmark Electronics Inc | 0.2 | 1.35 | 1.13 |
| BYL.TO | Baylin Technologies Inc | 0.85 | 0.57 | 0.31 |
| CTS | CTS Corp | 0.08 | 1.38 | 1.28 |
| IEC | IEC Electronics Corp | 0.17 | 1.05 | 0.9 |
| KE | Kimball Electronics Inc | 0.69 | 1.17 | 0.71 |
| KTCC | Key Tronic Corp | 3.68 | 0.67 | 0.15 |
| MEI | Methode Electronics Inc | 1.24 | 2.07 | 0.95 |
| NSYS | Nortech Systems Inc | 0.36 | 0.17 | 0.12 |
| PLXS | Plexus Corp | 0.07 | 1.17 | 1.1 |
| TTMI | TTM Technologies Inc | 0.32 | 1.89 | 1.45 |
| Low | High | |
| Unlevered beta | 0.9 | 1.1 |
| Relevered beta | 1.61 | 1.97 |
| Adjusted relevered beta | 1.41 | 1.65 |
FN'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 FN:
cost_of_equity (12.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.41) + 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.