The WACC of Innovaro Inc (INNI) is 8.9%.
| Range | Selected | |
| Cost of equity | 5.30% - 34.60% | 19.95% |
| Tax rate | 2.00% - 2.20% | 2.10% |
| Cost of debt | 7.00% - 10.40% | 8.70% |
| WACC | 6.8% - 10.9% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.87 | 4.33 |
| Additional risk adjustments | 5.5% | 6.0% |
| Cost of equity | 5.30% | 34.60% |
| Tax rate | 2.00% | 2.20% |
| Debt/Equity ratio | 31.46 | 31.46 |
| Cost of debt | 7.00% | 10.40% |
| After-tax WACC | 6.8% | 10.9% |
| Selected WACC | 8.9% | |
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 (19.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.87) + risk_adjustments (5.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.