LW
Lamb Weston Holdings Inc
Price:  
59.46 
USD
Volume:  
1,635,637.00
United States | Food Products
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LW WACC - Weighted Average Cost of Capital

The WACC of Lamb Weston Holdings Inc (LW) is 6.3%.

The Cost of Equity of Lamb Weston Holdings Inc (LW) is 7.60%.
The Cost of Debt of Lamb Weston Holdings Inc (LW) is 4.80%.

Range Selected
Cost of equity 6.50% - 8.70% 7.60%
Tax rate 25.40% - 26.90% 26.15%
Cost of debt 4.00% - 5.60% 4.80%
WACC 5.4% - 7.3% 6.3%
WACC

LW WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.58 0.68
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.50% 8.70%
Tax rate 25.40% 26.90%
Debt/Equity ratio 0.45 0.45
Cost of debt 4.00% 5.60%
After-tax WACC 5.4% 7.3%
Selected WACC 6.3%

LW'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 LW:

cost_of_equity (7.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.58) + 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.