The WACC of Lannett Company Inc (LCI) is 5.2%.
| Range | Selected | |
| Cost of equity | 11.20% - 59.40% | 35.30% |
| Tax rate | 16.20% - 22.30% | 19.25% |
| Cost of debt | 5.20% - 7.00% | 6.10% |
| WACC | 4.4% - 6.1% | 5.2% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 1.4 | 9.03 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.20% | 59.40% |
| Tax rate | 16.20% | 22.30% |
| Debt/Equity ratio | 83.32 | 83.32 |
| Cost of debt | 5.20% | 7.00% |
| After-tax WACC | 4.4% | 6.1% |
| Selected WACC | 5.2% | |
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 LCI:
cost_of_equity (35.30%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (1.4) + 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.