The WACC of Hill-Rom Holdings Inc (HRC) is 7.7%.
Range | Selected | |
Cost of equity | 7.4% - 9.7% | 8.55% |
Tax rate | 17.9% - 21.8% | 19.85% |
Cost of debt | 4.0% - 4.5% | 4.25% |
WACC | 6.7% - 8.7% | 7.7% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 4.2% | 5.2% |
Adjusted beta | 1.01 | 1.06 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.4% | 9.7% |
Tax rate | 17.9% | 21.8% |
Debt/Equity ratio | 0.2 | 0.2 |
Cost of debt | 4.0% | 4.5% |
After-tax WACC | 6.7% | 8.7% |
Selected WACC | 7.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
HRC | Hill-Rom Holdings Inc | 0.2 | 0.55 | 0.47 |
CMD | Cantel Medical Corp | 0.31 | 1.55 | 1.24 |
CNMD | Conmed Corp | 0.51 | 0.28 | 0.2 |
IART | Integra Lifesciences Holdings Corp | 1.91 | 1.19 | 0.46 |
ITGR | Integer Holdings Corp | 0.25 | 0.69 | 0.58 |
LIVN | LivaNova PLC | 0.26 | 0.59 | 0.48 |
NUVA | NuVasive Inc | 0.43 | 0.94 | 0.7 |
STE | Steris plc | 0.14 | 0.18 | 0.16 |
TNDM | Tandem Diabetes Care Inc | 0.23 | 1.35 | 1.14 |
VAR | Varian Medical Systems Inc | 0.02 | 1.07 | 1.05 |
Low | High | |
Unlevered beta | 0.48 | 0.63 |
Relevered beta | 1.01 | 1.09 |
Adjusted relevered beta | 1.01 | 1.06 |
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 HRC:
cost_of_equity (8.55%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.01) + 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.