Moody's WACC - Weighted Average Cost of Capital

The WACC of Moody's Corp (MCO) is 7.0%.

The Cost of Equity of Moody's Corp (MCO) is 7.25%.

The Cost of Debt of Moody's Corp (MCO) is 4.30%.

	Range	Selected
Cost of equity	5.50% - 9.00%	7.25%
Tax rate	19.50% - 19.90%	19.70%
Cost of debt	4.00% - 4.60%	4.30%
WACC	5.3% - 8.6%	7.0%

WACC

Moody's WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.36	0.74

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.50%	9.00%

Tax rate	19.50%	19.90%
Debt/Equity ratio	0.09	0.09
Cost of debt	4.00%	4.60%

After-tax WACC	5.3%	8.6%


Selected WACC	7.0%

Moody's'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 Moody's:

cost_of_equity (7.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.36) + 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.