LITE
Lumentum Holdings Inc
Price:  
168.77 
USD
Volume:  
3,857,652.00
United States | Communications Equipment
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Lumentum WACC - Weighted Average Cost of Capital

The WACC of Lumentum Holdings Inc (LITE) is 8.0%.

The Cost of Equity of Lumentum Holdings Inc (LITE) is 8.95%.
The Cost of Debt of Lumentum Holdings Inc (LITE) is 5.50%.

Range Selected
Cost of equity 7.80% - 10.10% 8.95%
Tax rate 23.30% - 31.00% 27.15%
Cost of debt 4.00% - 7.00% 5.50%
WACC 6.9% - 9.1% 8.0%
WACC

Lumentum WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.85 0.93
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.80% 10.10%
Tax rate 23.30% 31.00%
Debt/Equity ratio 0.23 0.23
Cost of debt 4.00% 7.00%
After-tax WACC 6.9% 9.1%
Selected WACC 8.0%

Lumentum'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 Lumentum:

cost_of_equity (8.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.85) + 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.