FSS WACC - Weighted Average Cost of Capital
The WACC of Federal Signal Corp (FSS) is 8.7%.
| Range | Selected | |
| Cost of equity | 7.8% - 10.2% | 9% |
| Tax rate | 19.3% - 21.1% | 20.2% |
| Cost of debt | 4.1% - 4.5% | 4.3% |
| WACC | 7.6% - 9.9% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.85 | 0.94 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.8% | 10.2% |
| Tax rate | 19.3% | 21.1% |
| Debt/Equity ratio | 0.04 | 0.04 |
| Cost of debt | 4.1% | 4.5% |
| After-tax WACC | 7.6% | 9.9% |
| Selected WACC | 8.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FSS | Federal Signal Corp | 0.04 | 1.15 | 1.12 |
| ALG | Alamo Group Inc | 0.1 | 0.69 | 0.64 |
| ASTE | Astec Industries Inc | 0.13 | 1.32 | 1.2 |
| BLBD | Blue Bird Corp | 0.08 | 0.96 | 0.9 |
| CVGI | Commercial Vehicle Group Inc | 2.92 | 0.83 | 0.25 |
| MLR | Miller Industries Inc | 0.13 | 1.21 | 1.1 |
| MTW | Manitowoc Company Inc | 1.09 | 1.65 | 0.88 |
| PLOW | Douglas Dynamics Inc | 0.23 | 0.59 | 0.5 |
| SHYF | Shyft Group Inc | 0.4 | 1.09 | 0.83 |
| WNC | Wabash National Corp | 1.08 | 0.43 | 0.23 |
| Low | High | |
| Unlevered beta | 0.75 | 0.89 |
| Relevered beta | 0.78 | 0.91 |
| Adjusted relevered beta | 0.85 | 0.94 |
FSS'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 FSS:
cost_of_equity (9.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.85) + 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.