LUMO WACC - Weighted Average Cost of Capital
The WACC of Lumos Pharma Inc (LUMO) is 7.2%.
| Range | Selected | |
| Cost of equity | 7.7% - 11.0% | 9.35% |
| Tax rate | 0.1% - 0.8% | 0.45% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.3% - 8.0% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.83 | 1.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.7% | 11.0% |
| Tax rate | 0.1% | 0.8% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.3% | 8.0% |
| Selected WACC | 7.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| LUMO | Lumos Pharma Inc | 1.18 | 1.34 | 0.62 |
| ABBV | Abbvie Inc | 0.2 | 0.33 | 0.27 |
| ALNA | Allena Pharmaceuticals Inc | 0.77 | 1.14 | 0.64 |
| AMGN | Amgen Inc | 0.39 | 0.37 | 0.26 |
| ATNM | Actinium Pharmaceuticals Inc | 0 | 1.88 | 1.88 |
| EVAX | Evaxion Biotech A/S | 3.85 | 1.89 | 0.39 |
| FSTX | F-Star Therapeutics Inc | 0.06 | 1.01 | 0.96 |
| GILD | Gilead Sciences Inc | 0.2 | 0.33 | 0.28 |
| SLNO | Soleno Therapeutics Inc | 0.01 | 0.36 | 0.35 |
| SYN | Synthetic Biologics Inc | 0.02 | 1.38 | 1.36 |
| 950220.KQ | Neoimmunetech Inc (Pre-reincorporation) | 0 | 0.52 | 0.52 |
| Low | High | |
| Unlevered beta | 0.39 | 0.62 |
| Relevered beta | 0.75 | 1.13 |
| Adjusted relevered beta | 0.83 | 1.09 |
LUMO'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 LUMO:
cost_of_equity (9.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.83) + 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.