MCBC WACC - Weighted Average Cost of Capital
The WACC of Macatawa Bank Corp (MCBC) is 7.4%.
| Range | Selected | |
| Cost of equity | 9.1% - 12.4% | 10.75% |
| Tax rate | 18.9% - 19.1% | 19% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.6% - 8.2% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.14 | 1.35 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.1% | 12.4% |
| Tax rate | 18.9% | 19.1% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.6% | 8.2% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| MCBC | Macatawa Bank Corp | 0.83 | -0.24 | -0.15 |
| CCB | Coastal Financial Corp (EVERETT) | 0.03 | 1.02 | 0.99 |
| CNND | Canandaigua National Corp | 0.15 | -0.03 | -0.03 |
| CSHX | Cashmere Valley Bank | 0.07 | 0.06 | 0.05 |
| FDBC | Fidelity D&D Bancorp Inc | 0.03 | 0.86 | 0.84 |
| FMAO | Farmers & Merchants Bancorp Inc | 0.16 | 1.04 | 0.92 |
| FNLC | First Bancorp Inc | 0.17 | 0.63 | 0.55 |
| MVBF | MVB Financial Corp | 0.25 | 1.02 | 0.85 |
| NRIM | Northrim BanCorp Inc | 0.02 | 1.15 | 1.14 |
| TCFC | Community Financial Corp(Maryland) | 0.72 | 0.31 | 0.2 |
| VB.TO | VersaBank | 0.52 | 1.06 | 0.75 |
| Low | High | |
| Unlevered beta | 0.55 | 0.84 |
| Relevered beta | 1.21 | 1.52 |
| Adjusted relevered beta | 1.14 | 1.35 |
MCBC'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 MCBC:
cost_of_equity (10.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.14) + 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.