FOTB WACC - Weighted Average Cost of Capital
The WACC of First Ottawa Bancshares Inc (FOTB) is 5.5%.
| Range | Selected | |
| Cost of equity | 5.6% - 7.2% | 6.4% |
| Tax rate | 26.4% - 28.0% | 27.2% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.0% - 6.1% | 5.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.37 | 0.42 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.6% | 7.2% |
| Tax rate | 26.4% | 28.0% |
| Debt/Equity ratio | 0.46 | 0.46 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.0% | 6.1% |
| Selected WACC | 5.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FOTB | First Ottawa Bancshares Inc | 0.46 | 0.06 | 0.04 |
| BKOR | Oak Ridge Financial Services Inc | 0.38 | -0.05 | -0.04 |
| BRBW | Brunswick Bancorp | 1.02 | 0.18 | 0.1 |
| CCBC | Chino Commercial Bancorp | 0.41 | -0.4 | -0.3 |
| CZBT | Citizens Bancorp of Virginia Inc | 0.11 | 0.15 | 0.14 |
| FBPI | First Bancorp of Indiana Inc | 1 | -0.09 | -0.05 |
| FRFC | First Robinson Financial Cororation | 4.08 | 0.2 | 0.05 |
| LSFG | Lifestore Financial Group Inc | 0.57 | 0.15 | 0.1 |
| PCLB | Pinnacle Bancshares Inc | 0.29 | 0.21 | 0.18 |
| PEBC | Peoples Bancorp Inc | 0.07 | 0.2 | 0.19 |
| Low | High | |
| Unlevered beta | 0.05 | 0.1 |
| Relevered beta | 0.06 | 0.13 |
| Adjusted relevered beta | 0.37 | 0.42 |
FOTB'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 FOTB:
cost_of_equity (6.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.37) + 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.