MPAA WACC - Weighted Average Cost of Capital

The WACC of Motorcar Parts of America Inc (MPAA) is 9.5%.

The Cost of Equity of Motorcar Parts of America Inc (MPAA) is 7.35%.

The Cost of Debt of Motorcar Parts of America Inc (MPAA) is 21.55%.

	Range	Selected
Cost of equity	6.10% - 8.60%	7.35%
Tax rate	37.50% - 41.00%	39.25%
Cost of debt	15.60% - 27.50%	21.55%
WACC	7.5% - 11.5%	9.5%

WACC

MPAA WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.48	0.67

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.10%	8.60%

Tax rate	37.50%	41.00%
Debt/Equity ratio	0.61	0.61
Cost of debt	15.60%	27.50%

After-tax WACC	7.5%	11.5%


Selected WACC	9.5%

MPAA'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 MPAA:

cost_of_equity (7.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.48) + 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.