The WACC of Metro Global Media Inc (MGMA) is 7.0%.
| Range | Selected | |
| Cost of equity | 4.80% - 73.20% | 39.00% |
| Tax rate | 13.20% - 24.80% | 19.00% |
| Cost of debt | 7.00% - 10.40% | 8.70% |
| WACC | 6.1% - 7.8% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -14.26 | 0.33 |
| Additional risk adjustments | 66.5% | 67.0% |
| Cost of equity | 4.80% | 73.20% |
| Tax rate | 13.20% | 24.80% |
| Debt/Equity ratio | 173333.33 | 173333.33 |
| Cost of debt | 7.00% | 10.40% |
| After-tax WACC | 6.1% | 7.8% |
| Selected WACC | 7.0% | |
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 MGMA:
cost_of_equity (39.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-14.26) + risk_adjustments (66.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.