The WACC of Local Corp (LOCMQ) is 7.3%.
| Range | Selected | |
| Cost of equity | 164.20% - 947.10% | 555.65% |
| Tax rate | 1.90% - 2.10% | 2.00% |
| Cost of debt | 5.90% - 7.00% | 6.45% |
| WACC | 6.1% - 8.5% | 7.3% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 32.01 | 157 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 164.20% | 947.10% |
| Tax rate | 1.90% | 2.10% |
| Debt/Equity ratio | 559.03 | 559.03 |
| Cost of debt | 5.90% | 7.00% |
| After-tax WACC | 6.1% | 8.5% |
| Selected WACC | 7.3% | |
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 LOCMQ:
cost_of_equity (555.65%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (32.01) + 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.