LULU
Lululemon Athletica Inc
Price:  
277.36 
USD
Volume:  
1,810,688.00
Canada | Textiles, Apparel & Luxury Goods
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Lululemon WACC - Weighted Average Cost of Capital

The WACC of Lululemon Athletica Inc (LULU) is 6.2%.

The Cost of Equity of Lululemon Athletica Inc (LULU) is 9.15%.
The Cost of Debt of Lululemon Athletica Inc (LULU) is 4.50%.

Range Selected
Cost of equity 7.40% - 10.90% 9.15%
Tax rate 28.50% - 29.10% 28.80%
Cost of debt 4.50% - 4.50% 4.50%
WACC 5.3% - 7.1% 6.2%
WACC

Lululemon WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.76 1.08
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.40% 10.90%
Tax rate 28.50% 29.10%
Debt/Equity ratio 1 1
Cost of debt 4.50% 4.50%
After-tax WACC 5.3% 7.1%
Selected WACC 6.2%

Lululemon'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 Lululemon:

cost_of_equity (9.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.76) + 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.