The WACC of II-VI Inc (IIVI) is 9.3%.
| Range | Selected | |
| Cost of equity | 9.90% - 12.80% | 11.35% |
| Tax rate | 16.20% - 16.60% | 16.40% |
| Cost of debt | 4.20% - 6.50% | 5.35% |
| WACC | 8.0% - 10.6% | 9.3% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.35 | 1.44 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.90% | 12.80% |
| Tax rate | 16.20% | 16.60% |
| Debt/Equity ratio | 0.42 | 0.42 |
| Cost of debt | 4.20% | 6.50% |
| After-tax WACC | 8.0% | 10.6% |
| Selected WACC | 9.3% | |
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 IIVI:
cost_of_equity (11.35%) = risk_free_rate (4.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.35) + 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.