The WACC of Gex Management Inc (GXXM) is 3.3%.
| Range | Selected | |
| Cost of equity | 2.80% - 7.30% | 5.05% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 2.9% - 3.7% | 3.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.46 | 0.25 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 2.80% | 7.30% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 9.44 | 9.44 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 2.9% | 3.7% |
| Selected WACC | 3.3% | |
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 GXXM:
cost_of_equity (5.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.46) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.