The WACC of Kraton Corp (KRA) is 8.3%.
| Range | Selected | |
| Cost of equity | 9.30% - 12.70% | 11.00% |
| Tax rate | 16.10% - 21.60% | 18.85% |
| Cost of debt | 4.20% - 4.80% | 4.50% |
| WACC | 7.2% - 9.4% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.44 | 1.62 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.30% | 12.70% |
| Tax rate | 16.10% | 21.60% |
| Debt/Equity ratio | 0.59 | 0.59 |
| Cost of debt | 4.20% | 4.80% |
| After-tax WACC | 7.2% | 9.4% |
| Selected WACC | 8.3% | |
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 Kraton:
cost_of_equity (11.00%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.44) + 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.