The WACC of Forward Air Corp (FWRD) is 13.4%.
| Range | Selected | |
| Cost of equity | 14.80% - 22.20% | 18.50% |
| Tax rate | 18.70% - 24.70% | 21.70% |
| Cost of debt | 7.70% - 23.90% | 15.80% |
| WACC | 8.0% - 18.8% | 13.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 2.39 | 3.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.80% | 22.20% |
| Tax rate | 18.70% | 24.70% |
| Debt/Equity ratio | 4.01 | 4.01 |
| Cost of debt | 7.70% | 23.90% |
| After-tax WACC | 8.0% | 18.8% |
| Selected WACC | 13.4% | |
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 FWRD:
cost_of_equity (18.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (2.39) + 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.