The WACC of GTT Communications Inc (GTT) is 13.5%.
| Range | Selected | |
| Cost of equity | 35.10% - 53.60% | 44.35% |
| Tax rate | 2.80% - 18.80% | 10.80% |
| Cost of debt | 7.90% - 20.60% | 14.25% |
| WACC | 8.8% - 18.2% | 13.5% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 7.52 | 9.43 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 35.10% | 53.60% |
| Tax rate | 2.80% | 18.80% |
| Debt/Equity ratio | 23.52 | 23.52 |
| Cost of debt | 7.90% | 20.60% |
| After-tax WACC | 8.8% | 18.2% |
| Selected WACC | 13.5% | |
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 GTT:
cost_of_equity (44.35%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (7.52) + 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.