The WACC of McRae Industries Inc (MCRAA) is 7.0%.
Range | Selected | |
Cost of equity | 8.8% - 11.7% | 10.25% |
Tax rate | 24.6% - 25.8% | 25.2% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.3% - 7.7% | 7.0% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1.08 | 1.22 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.8% | 11.7% |
Tax rate | 24.6% | 25.8% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.3% | 7.7% |
Selected WACC | 7.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
MCRAA | McRae Industries Inc | 0.82 | 0.08 | 0.05 |
CROX | Crocs Inc | 0.23 | 0.69 | 0.59 |
CRWS | Crown Crafts Inc | 0.28 | 0.33 | 0.27 |
KBSF | KBS Fashion Group Ltd | 0.09 | 1.36 | 1.28 |
LAKE | Lakeland Industries Inc | 0.14 | 0.93 | 0.84 |
MENE.V | Mene Inc | 0.02 | 1.5 | 1.47 |
NAKD | Naked Brand Group Ltd | 0.03 | 0.6 | 0.59 |
NKE | Nike Inc | 0.08 | 0.75 | 0.7 |
PXFG | Phoenix Footwear Group Inc | 80.99 | -2.01 | -0.03 |
SKX | Skechers USA Inc | 0.05 | 0.7 | 0.68 |
WWW | Wolverine World Wide Inc | 0.43 | 1.75 | 1.32 |
Low | High | |
Unlevered beta | 0.59 | 0.7 |
Relevered beta | 1.12 | 1.33 |
Adjusted relevered beta | 1.08 | 1.22 |
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 MCRAA:
cost_of_equity (10.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.08) + 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.