GHC WACC - Weighted Average Cost of Capital
The WACC of Graham Holdings Co (GHC) is 8.3%.
| Range | Selected | |
| Cost of equity | 7.7% - 10.5% | 9.1% |
| Tax rate | 27.6% - 28.8% | 28.2% |
| Cost of debt | 6.5% - 7.0% | 6.75% |
| WACC | 7.1% - 9.4% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.82 | 1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.7% | 10.5% |
| Tax rate | 27.6% | 28.8% |
| Debt/Equity ratio | 0.23 | 0.23 |
| Cost of debt | 6.5% | 7.0% |
| After-tax WACC | 7.1% | 9.4% |
| Selected WACC | 8.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| GHC | Graham Holdings Co | 0.23 | 0.72 | 0.62 |
| ATGE | Adtalem Global Education Inc | 0.15 | 0.71 | 0.64 |
| CNGO | Cengage Learning Holdings II Inc | 0.97 | 0.17 | 0.1 |
| HMHC | Houghton Mifflin Harcourt Co | 0.12 | 1.14 | 1.05 |
| LAUR | Laureate Education Inc | 0.03 | 0.87 | 0.85 |
| LINC | Lincoln Educational Services Corp | 0.04 | 1.13 | 1.09 |
| LRN | Stride Inc | 0.08 | 0.34 | 0.32 |
| UTI | Universal Technical Institute Inc | 0.07 | 0.92 | 0.87 |
| ZVO | Zovio Inc | 0.45 | 1.27 | 0.96 |
| Low | High | |
| Unlevered beta | 0.68 | 0.87 |
| Relevered beta | 0.73 | 1 |
| Adjusted relevered beta | 0.82 | 1 |
GHC'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 GHC:
cost_of_equity (9.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.82) + 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.