The WACC of Michaels Companies Inc (MIK) is 8.1%.
| Range | Selected | |
| Cost of equity | 9.00% - 13.80% | 11.40% |
| Tax rate | 23.60% - 28.00% | 25.80% |
| Cost of debt | 5.30% - 5.50% | 5.40% |
| WACC | 6.8% - 9.4% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.38 | 1.84 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.00% | 13.80% |
| Tax rate | 23.60% | 28.00% |
| Debt/Equity ratio | 0.8 | 0.8 |
| Cost of debt | 5.30% | 5.50% |
| After-tax WACC | 6.8% | 9.4% |
| Selected WACC | 8.1% | |
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 MIK:
cost_of_equity (11.40%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.38) + 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.