Moody's WACC - Weighted Average Cost of Capital

The WACC of Moody's Corp (MCO) is 6.8%.

The Cost of Equity of Moody's Corp (MCO) is 7.05%.

The Cost of Debt of Moody's Corp (MCO) is 4.25%.

	Range	Selected
Cost of equity	5.60% - 8.50%	7.05%
Tax rate	19.50% - 20.30%	19.90%
Cost of debt	4.00% - 4.50%	4.25%
WACC	5.4% - 8.1%	6.8%

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	0.39	0.66

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.60%	8.50%

Tax rate	19.50%	20.30%
Debt/Equity ratio	0.09	0.09
Cost of debt	4.00%	4.50%

After-tax WACC	5.4%	8.1%


Selected WACC	6.8%

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 (7.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.39) + 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.