The WACC of Harbor Custom Development Inc (HCDI) is 9.9%.
| Range | Selected | |
| Cost of equity | 1,072.80% - 1,342.10% | 1,207.45% |
| Tax rate | 19.20% - 37.30% | 28.25% |
| Cost of debt | 7.00% - 10.10% | 8.55% |
| WACC | 9.1% - 10.6% | 9.9% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 213.72 | 222.82 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 1,072.80% | 1,342.10% |
| Tax rate | 19.20% | 37.30% |
| Debt/Equity ratio | 307.55 | 307.55 |
| Cost of debt | 7.00% | 10.10% |
| After-tax WACC | 9.1% | 10.6% |
| Selected WACC | 9.9% | |
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 HCDI:
cost_of_equity (1,207.45%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (213.72) + 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.