KMPH WACC - Weighted Average Cost of Capital
The WACC of KemPharm Inc (KMPH) is 38.1%.
| Range | Selected | |
| Cost of equity | 6.9% - 9.2% | 8.05% |
| Tax rate | 0.4% - 0.7% | 0.55% |
| Cost of debt | 7.0% - 764.4% | 385.7% |
| WACC | 6.9% - 69.3% | 38.1% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.54 | 0.67 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.9% | 9.2% |
| Tax rate | 0.4% | 0.7% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 7.0% | 764.4% |
| After-tax WACC | 6.9% | 69.3% |
| Selected WACC | 38.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| KMPH | KemPharm Inc | 0.09 | 2.16 | 1.99 |
| AGRX | Agile Therapeutics Inc | 0.16 | -0.34 | -0.29 |
| BMY | Bristol-Myers Squibb Co | 0.52 | 0.14 | 0.09 |
| CBAY | Cymabay Therapeutics Inc | 0.03 | 0.93 | 0.91 |
| JNJ | Johnson & Johnson | 0.1 | 0.09 | 0.08 |
| LLY | Eli Lilly and Co | 0.05 | 0.75 | 0.72 |
| MRK | Merck & Co Inc | 0.19 | 0.46 | 0.38 |
| PFE | Pfizer Inc | 0.49 | 0.35 | 0.23 |
| SEEL | Seelos Therapeutics Inc | 142.13 | 1.63 | 0.01 |
| VTRS | Viatris Inc | 1.42 | 0.84 | 0.35 |
| XERS | Xeris Pharmaceuticals Inc | 0.31 | 1.13 | 0.86 |
| Low | High | |
| Unlevered beta | 0.23 | 0.38 |
| Relevered beta | 0.31 | 0.51 |
| Adjusted relevered beta | 0.54 | 0.67 |
KMPH'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 KMPH:
cost_of_equity (8.05%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.54) + 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.