The WACC of Legacy Education Alliance Inc (LEAI) is 8.0%.
| Range | Selected | |
| Cost of equity | 5.20% - 67.00% | 36.10% |
| Tax rate | 13.40% - 36.00% | 24.70% |
| Cost of debt | 10.60% - 10.60% | 10.60% |
| WACC | 9.2% - 6.8% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.26 | 10.65 |
| Additional risk adjustments | 2.5% | 3.0% |
| Cost of equity | 5.20% | 67.00% |
| Tax rate | 13.40% | 36.00% |
| Debt/Equity ratio | 1723.26 | 1723.26 |
| Cost of debt | 10.60% | 10.60% |
| After-tax WACC | 9.2% | 6.8% |
| Selected WACC | 8.0% | |
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 LEAI:
cost_of_equity (36.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.26) + risk_adjustments (2.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.