The WACC of Goldman Sachs Group Inc (GS) is 11.2%.
Range | Selected | |
Cost of equity | 9.3% - 14.3% | 11.8% |
Tax rate | 20.4% - 21.4% | 20.9% |
Cost of debt | 4.2% - 23.9% | 14.05% |
WACC | 4.2% - 18.1% | 11.2% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1.18 | 1.68 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 9.3% | 14.3% |
Tax rate | 20.4% | 21.4% |
Debt/Equity ratio | 5.93 | 5.93 |
Cost of debt | 4.2% | 23.9% |
After-tax WACC | 4.2% | 18.1% |
Selected WACC | 11.2% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
GS | Goldman Sachs Group Inc | 5.93 | 1.43 | 0.25 |
LPLA | LPL Financial Holdings Inc | 0.19 | 1.52 | 1.32 |
MS | Morgan Stanley | 3.71 | 1.53 | 0.39 |
RCG.TO | RF Capital Group Inc | 1.32 | 0.19 | 0.1 |
RILY | B. Riley Financial Inc | 58.16 | -0.06 | 0 |
RJF | Raymond James Financial Inc | 2.03 | 1.23 | 0.47 |
SCHW | Charles Schwab Corp | 1.92 | 1.12 | 0.44 |
SNEX | Stonex Group Inc | 2.69 | 1.03 | 0.33 |
SRL | Scully Royalty Ltd | 0.33 | 0.22 | 0.18 |
VIRT | Virtu Financial Inc | 1.9 | 0.42 | 0.17 |
Low | High | |
Unlevered beta | 0.22 | 0.35 |
Relevered beta | 1.27 | 2.01 |
Adjusted relevered beta | 1.18 | 1.68 |
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 GS:
cost_of_equity (11.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.18) + 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.