GGG WACC - Weighted Average Cost of Capital
The WACC of Graco Inc (GGG) is 9.0%.
| Range | Selected | |
| Cost of equity | 8.0% - 10.1% | 9.05% |
| Tax rate | 15.5% - 17.1% | 16.3% |
| Cost of debt | 4.5% - 6.7% | 5.6% |
| WACC | 8.0% - 10.1% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.89 | 0.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.0% | 10.1% |
| Tax rate | 15.5% | 17.1% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 4.5% | 6.7% |
| After-tax WACC | 8.0% | 10.1% |
| Selected WACC | 9.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| GGG | Graco Inc | 0 | 0.9 | 0.89 |
| B | Barnes Group Inc | 0.53 | 0.8 | 0.55 |
| DCI | Donaldson Company Inc | 0.07 | 0.85 | 0.81 |
| IEX | IDEX Corp | 0.14 | 1.02 | 0.91 |
| ITT | ITT Inc | 0.05 | 1.42 | 1.36 |
| JBT | John Bean Technologies Corp | 0.16 | 0.39 | 0.35 |
| MIDD | Middleby Corp | 0.31 | 1.07 | 0.86 |
| NDSN | Nordson Corp | 0.18 | 1.18 | 1.03 |
| SNA | Snap-On Inc | 0.07 | 0.81 | 0.77 |
| WWD | Woodward Inc | 0.06 | 1.32 | 1.26 |
| Low | High | |
| Unlevered beta | 0.84 | 0.9 |
| Relevered beta | 0.84 | 0.9 |
| Adjusted relevered beta | 0.89 | 0.93 |
GGG'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 GGG:
cost_of_equity (9.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.89) + 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.