IPG
Interpublic Group of Companies Inc
Price:  
26.84 
USD
Volume:  
2,410,150.00
United States | Media
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IPG WACC - Weighted Average Cost of Capital

The WACC of Interpublic Group of Companies Inc (IPG) is 7.8%.

The Cost of Equity of Interpublic Group of Companies Inc (IPG) is 8.85%.
The Cost of Debt of Interpublic Group of Companies Inc (IPG) is 5.65%.

Range Selected
Cost of equity 7.60% - 10.10% 8.85%
Tax rate 20.70% - 22.40% 21.55%
Cost of debt 4.90% - 6.40% 5.65%
WACC 6.7% - 8.9% 7.8%
WACC

IPG WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.81 0.94
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.60% 10.10%
Tax rate 20.70% 22.40%
Debt/Equity ratio 0.3 0.3
Cost of debt 4.90% 6.40%
After-tax WACC 6.7% 8.9%
Selected WACC 7.8%

IPG'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 IPG:

cost_of_equity (8.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.81) + 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.