LPLA
LPL Financial Holdings Inc
Price:  
333.56 
USD
Volume:  
613,454.00
United States | Capital Markets
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LPLA WACC - Weighted Average Cost of Capital

The WACC of LPL Financial Holdings Inc (LPLA) is 8.6%.

The Cost of Equity of LPL Financial Holdings Inc (LPLA) is 9.60%.
The Cost of Debt of LPL Financial Holdings Inc (LPLA) is 5.20%.

Range Selected
Cost of equity 8.00% - 11.20% 9.60%
Tax rate 24.00% - 24.20% 24.10%
Cost of debt 4.90% - 5.50% 5.20%
WACC 7.3% - 10.0% 8.6%
WACC

LPLA WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.91 1.13
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.00% 11.20%
Tax rate 24.00% 24.20%
Debt/Equity ratio 0.21 0.21
Cost of debt 4.90% 5.50%
After-tax WACC 7.3% 10.0%
Selected WACC 8.6%

LPLA'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 LPLA:

cost_of_equity (9.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.91) + 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.