The WACC of Iconix Brand Group Inc (ICON) is 17.5%.
| Range | Selected | |
| Cost of equity | 5.30% - 17.30% | 11.30% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 23.90% - 23.90% | 23.90% |
| WACC | 17.5% - 17.4% | 17.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -1.64 | 0.61 |
| Additional risk adjustments | 9.0% | 9.5% |
| Cost of equity | 5.30% | 17.30% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 153.4 | 153.4 |
| Cost of debt | 23.90% | 23.90% |
| After-tax WACC | 17.5% | 17.4% |
| Selected WACC | 17.5% | |
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 ICON:
cost_of_equity (11.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-1.64) + risk_adjustments (9.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.