HOMB
Home BancShares Inc
Price:  
29.35 
USD
Volume:  
918,865
United States | Banks

HOMB WACC - Weighted Average Cost of Capital

The WACC of Home BancShares Inc (HOMB) is 9.2%.

The Cost of Equity of Home BancShares Inc (HOMB) is 9.7%.
The Cost of Debt of Home BancShares Inc (HOMB) is 5%.

RangeSelected
Cost of equity8.4% - 11.0%9.7%
Tax rate22.9% - 23.1%23%
Cost of debt5.0% - 5.0%5%
WACC8.0% - 10.3%9.2%
WACC

HOMB WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta11.1
Additional risk adjustments0.0%0.5%
Cost of equity8.4%11.0%
Tax rate22.9%23.1%
Debt/Equity ratio
0.10.1
Cost of debt5.0%5.0%
After-tax WACC8.0%10.3%
Selected WACC9.2%

HOMB'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 HOMB:

cost_of_equity (9.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1) + 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.