The WACC of Innovaro Inc (INNI) is 9.0%.
| Range | Selected | |
| Cost of equity | 5.10% - 58.60% | 31.85% |
| Tax rate | 2.00% - 2.20% | 2.10% |
| Cost of debt | 7.00% - 10.40% | 8.70% |
| WACC | 6.8% - 11.1% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -1.9 | 7.8 |
| Additional risk adjustments | 10.0% | 10.5% |
| Cost of equity | 5.10% | 58.60% |
| Tax rate | 2.00% | 2.20% |
| Debt/Equity ratio | 52.26 | 52.26 |
| Cost of debt | 7.00% | 10.40% |
| After-tax WACC | 6.8% | 11.1% |
| Selected WACC | 9.0% | |
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 INNI:
cost_of_equity (31.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-1.9) + risk_adjustments (10.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.