The WACC of Melco Resorts & Entertainment Ltd (MLCO) is 6.4%.
Range | Selected | |
Cost of equity | 7.7% - 11.1% | 9.4% |
Tax rate | 0.4% - 1.6% | 1% |
Cost of debt | 5.1% - 5.5% | 5.3% |
WACC | 5.8% - 7.0% | 6.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.84 | 1.11 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.7% | 11.1% |
Tax rate | 0.4% | 1.6% |
Debt/Equity ratio | 2.53 | 2.53 |
Cost of debt | 5.1% | 5.5% |
After-tax WACC | 5.8% | 7.0% |
Selected WACC | 6.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
MLCO | Melco Resorts & Entertainment Ltd | 2.53 | 0.93 | 0.26 |
ARHN | Archon Corp | 0.45 | 0.18 | 0.13 |
BYD | Boyd Gaming Corp | 0.48 | 0.96 | 0.65 |
CHDN | Churchill Downs Inc | 0.65 | 0.59 | 0.36 |
CNTY | Century Casinos Inc | 14.72 | 1.25 | 0.08 |
CZR | Caesars Entertainment Inc | 4.05 | 1.59 | 0.32 |
JACK | Jack in the Box Inc | 4.51 | 0.78 | 0.14 |
RRR | Red Rock Resorts Inc | 0.59 | 1.16 | 0.73 |
WEN | Wendys Co | 1.49 | 0.31 | 0.13 |
WYNN | Wynn Resorts Ltd | 0.96 | 0.91 | 0.47 |
Low | High | |
Unlevered beta | 0.22 | 0.33 |
Relevered beta | 0.76 | 1.16 |
Adjusted relevered beta | 0.84 | 1.11 |
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 MLCO:
cost_of_equity (9.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.84) + 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.