FRME
First Merchants Corp
Price:  
38.66 
USD
Volume:  
243,868.00
United States | Banks
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FRME WACC - Weighted Average Cost of Capital

The WACC of First Merchants Corp (FRME) is 9.1%.

The Cost of Equity of First Merchants Corp (FRME) is 9.80%.
The Cost of Debt of First Merchants Corp (FRME) is 5.00%.

Range Selected
Cost of equity 8.60% - 11.00% 9.80%
Tax rate 13.20% - 13.40% 13.30%
Cost of debt 5.00% - 5.00% 5.00%
WACC 8.1% - 10.1% 9.1%
WACC

FRME WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.03 1.09
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.60% 11.00%
Tax rate 13.20% 13.40%
Debt/Equity ratio 0.14 0.14
Cost of debt 5.00% 5.00%
After-tax WACC 8.1% 10.1%
Selected WACC 9.1%

FRME'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 FRME:

cost_of_equity (9.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.03) + 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.