INDB WACC - Weighted Average Cost of Capital
The WACC of Independent Bank Corp (Massachusetts) (INDB) is 8.8%.
| Range | Selected | |
| Cost of equity | 7.8% - 10.0% | 8.9% |
| Tax rate | 23.4% - 23.9% | 23.65% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.7% - 9.8% | 8.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.86 | 0.91 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.8% | 10.0% |
| Tax rate | 23.4% | 23.9% |
| Debt/Equity ratio | 0.02 | 0.02 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.7% | 9.8% |
| Selected WACC | 8.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| INDB | Independent Bank Corp (Massachusetts) | 0.02 | 0.94 | 0.92 |
| BANF | BancFirst Corp | 0.02 | 0.97 | 0.96 |
| BOH | Bank of Hawaii Corp | 0.04 | 0.6 | 0.58 |
| FIBK | First Interstate BancSystem Inc | 0.29 | 0.97 | 0.79 |
| FRME | First Merchants Corp | 0.16 | 0.86 | 0.77 |
| HTH | Hilltop Holdings Inc | 0.65 | 0.57 | 0.38 |
| IBOC | International Bancshares Corp | 0.17 | 0.91 | 0.81 |
| LOB | Live Oak Bancshares Inc | 0.09 | 1.08 | 1 |
| RNST | Renasant Corp | 0.13 | 1.06 | 0.96 |
| SFBS | ServisFirst Bancshares Inc | 0.52 | 1.03 | 0.74 |
| Low | High | |
| Unlevered beta | 0.78 | 0.85 |
| Relevered beta | 0.79 | 0.87 |
| Adjusted relevered beta | 0.86 | 0.91 |
INDB'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 INDB:
cost_of_equity (8.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.86) + 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.