Lowe's WACC - Weighted Average Cost of Capital

The WACC of Lowe's Companies Inc (LOW) is 7.0%.

The Cost of Equity of Lowe's Companies Inc (LOW) is 7.95%.

The Cost of Debt of Lowe's Companies Inc (LOW) is 4.90%.

	Range	Selected
Cost of equity	6.70% - 9.20%	7.95%
Tax rate	24.40% - 24.60%	24.50%
Cost of debt	4.90% - 4.90%	4.90%
WACC	6.0% - 8.0%	7.0%

WACC

Lowe's WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.62	0.78

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.70%	9.20%

Tax rate	24.40%	24.60%
Debt/Equity ratio	0.3	0.3
Cost of debt	4.90%	4.90%

After-tax WACC	6.0%	8.0%


Selected WACC	7.0%

Lowe's'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 Lowe's:

cost_of_equity (7.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.62) + 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.