HMHC WACC - Weighted Average Cost of Capital
The WACC of Houghton Mifflin Harcourt Co (HMHC) is 6.9%.
| Range | Selected | |
| Cost of equity | 5.7% - 8.2% | 6.95% |
| Tax rate | 3.6% - 7.3% | 5.45% |
| Cost of debt | 4.6% - 9.1% | 6.85% |
| WACC | 5.6% - 8.2% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.61 | 0.77 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.7% | 8.2% |
| Tax rate | 3.6% | 7.3% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 4.6% | 9.1% |
| After-tax WACC | 5.6% | 8.2% |
| Selected WACC | 6.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HMHC | Houghton Mifflin Harcourt Co | 0.12 | 1.14 | 1.02 |
| APEI | American Public Education Inc | 0.19 | 0.89 | 0.76 |
| ATGE | Adtalem Global Education Inc | 0.13 | 0.78 | 0.7 |
| CNGO | Cengage Learning Holdings II Inc | 1.1 | -0.01 | 0 |
| ESINQ | ITT Educational Services Inc | 97659.86 | -567.66 | -0.01 |
| LAUR | Laureate Education Inc | 0.03 | 0.84 | 0.82 |
| LRN | Stride Inc | 0.07 | 0.45 | 0.42 |
| STRA | Strategic Education Inc | 1.16 | 0.76 | 0.36 |
| UTI | Universal Technical Institute Inc | 0.07 | 1 | 0.94 |
| ZVO | Zovio Inc | 0.45 | 1.27 | 0.89 |
| Low | High | |
| Unlevered beta | 0.59 | 0.78 |
| Relevered beta | 0.42 | 0.66 |
| Adjusted relevered beta | 0.61 | 0.77 |
HMHC'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 HMHC:
cost_of_equity (6.95%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.61) + 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.