The WACC of Lifequest World Corp (LQWC) is 4.2%.
| Range | Selected | |
| Cost of equity | 3.70% - 8.30% | 6.00% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.7% - 4.8% | 4.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.14 | 0.53 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 3.70% | 8.30% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 3.22 | 3.22 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.7% | 4.8% |
| Selected WACC | 4.2% | |
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 LQWC:
cost_of_equity (6.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.14) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.