GO WACC - Weighted Average Cost of Capital

The WACC of Grocery Outlet Holding Corp (GO) is 6.9%.

The Cost of Equity of Grocery Outlet Holding Corp (GO) is 7.80%.

The Cost of Debt of Grocery Outlet Holding Corp (GO) is 5.80%.

	Range	Selected
Cost of equity	6.80% - 8.80%	7.80%
Tax rate	21.30% - 23.00%	22.15%
Cost of debt	5.50% - 6.10%	5.80%
WACC	6.1% - 7.7%	6.9%

WACC

GO WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.64	0.71

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.80%	8.80%

Tax rate	21.30%	23.00%
Debt/Equity ratio	0.39	0.39
Cost of debt	5.50%	6.10%

After-tax WACC	6.1%	7.7%


Selected WACC	6.9%

GO'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 GO:

cost_of_equity (7.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.64) + 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.