MOFG WACC - Weighted Average Cost of Capital
The WACC of Midwestone Financial Group Inc (IOWA) (MOFG) is 8.7%.
| Range | Selected | |
| Cost of equity | 8.5% - 10.7% | 9.6% |
| Tax rate | 21.7% - 24.7% | 23.2% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.8% - 9.7% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.01 | 1.04 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.5% | 10.7% |
| Tax rate | 21.7% | 24.7% |
| Debt/Equity ratio | 0.18 | 0.18 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.8% | 9.7% |
| Selected WACC | 8.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| MOFG | Midwestone Financial Group Inc (IOWA) | 0.18 | 0.99 | 0.87 |
| BFST | Business First Bancshares Inc | 0.16 | 1.08 | 0.95 |
| CARE | Carter Bank and Trust | 0.02 | 0.82 | 0.8 |
| CFB | Crossfirst Bankshares Inc | 0.01 | 1 | 0.99 |
| EQBK | Equity Bancshares Inc | 0.18 | 1.02 | 0.9 |
| FISI | Financial Institutions Inc | 0.14 | 1.11 | 1.01 |
| HTBI | Hometrust Bancshares Inc | 0.02 | 1.4 | 1.38 |
| MBWM | Mercantile Bank Corp | 0.32 | 1.07 | 0.86 |
| PGC | Peapack-Gladstone Financial Corp | 0.25 | 1.11 | 0.93 |
| THFF | First Financial Corp | 0.31 | 1.08 | 0.87 |
| Low | High | |
| Unlevered beta | 0.89 | 0.94 |
| Relevered beta | 1.01 | 1.06 |
| Adjusted relevered beta | 1.01 | 1.04 |
MOFG'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 MOFG:
cost_of_equity (9.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.01) + 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.