HFBA WACC - Weighted Average Cost of Capital
The WACC of HFB Financial Corp (HFBA) is 5.6%.
| Range | Selected | |
| Cost of equity | 6.2% - 8.9% | 7.55% |
| Tax rate | 33.3% - 34.3% | 33.8% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.9% - 6.4% | 5.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.5 | 0.73 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.2% | 8.9% |
| Tax rate | 33.3% | 34.3% |
| Debt/Equity ratio | 0.82 | 0.82 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.9% | 6.4% |
| Selected WACC | 5.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HFBA | HFB Financial Corp | 0.82 | 0.01 | 0 |
| BAP | Credicorp Ltd | 0.52 | 0.43 | 0.32 |
| CBA.AX | Commonwealth Bank of Australia | 0.79 | 1.12 | 0.73 |
| CIBH | CIB Marine Bancshares Inc | 0.62 | 0.33 | 0.23 |
| FINN | First National of Nebraska Inc | 0.53 | 0.04 | 0.03 |
| HABK | Hamilton Bancorp Inc | 0.44 | 0 | 0 |
| JPM | JPMorgan Chase & Co | 0.97 | 1.24 | 0.75 |
| LB.TO | Laurentian Bank of Canada | 16.21 | 0.75 | 0.06 |
| NA.TO | National Bank of Canada | 1.01 | 0.82 | 0.49 |
| NTB | Bank of N.T. Butterfield & Son Ltd | 0.1 | 0.69 | 0.65 |
| Low | High | |
| Unlevered beta | 0.16 | 0.39 |
| Relevered beta | 0.25 | 0.6 |
| Adjusted relevered beta | 0.5 | 0.73 |
HFBA'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 HFBA:
cost_of_equity (7.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.5) + 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.