LB
L Brands Inc
Price:  
78.44 
USD
Volume:  
285,039.00
United States | Specialty Retail
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LB WACC - Weighted Average Cost of Capital

The WACC of L Brands Inc (LB) is 7.0%.

The Cost of Equity of L Brands Inc (LB) is 7.15%.
The Cost of Debt of L Brands Inc (LB) is 5.00%.

Range Selected
Cost of equity 6.00% - 8.30% 7.15%
Tax rate 2.20% - 3.10% 2.65%
Cost of debt 5.00% - 5.00% 5.00%
WACC 6.0% - 8.1% 7.0%
WACC

LB WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.47 0.61
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.00% 8.30%
Tax rate 2.20% 3.10%
Debt/Equity ratio 0.06 0.06
Cost of debt 5.00% 5.00%
After-tax WACC 6.0% 8.1%
Selected WACC 7.0%

LB'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 LB:

cost_of_equity (7.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.47) + 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.