MRCY WACC - Weighted Average Cost of Capital
The WACC of Mercury Systems Inc (MRCY) is 8.3%.
| Range | Selected | |
| Cost of equity | 7.4% - 10.4% | 8.9% |
| Tax rate | 24.2% - 31.8% | 28% |
| Cost of debt | 7.0% - 7.0% | 7% |
| WACC | 7.1% - 9.5% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.78 | 0.99 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.4% | 10.4% |
| Tax rate | 24.2% | 31.8% |
| Debt/Equity ratio | 0.19 | 0.19 |
| Cost of debt | 7.0% | 7.0% |
| After-tax WACC | 7.1% | 9.5% |
| Selected WACC | 8.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| MRCY | Mercury Systems Inc | 0.19 | 0.82 | 0.72 |
| AERG | Applied Energetics Inc | 0 | -0.04 | -0.04 |
| AIRI | Air Industries Group | 2.07 | 0.99 | 0.4 |
| AVAV | AeroVironment Inc | 0 | 1.38 | 1.37 |
| DCO | Ducommun Inc | 0.19 | 0.85 | 0.75 |
| ETCC | Environmental Tectonics Corp | 1 | 0.5 | 0.29 |
| HRX.TO | Heroux Devtek Inc | 0.2 | 0.21 | 0.18 |
| HXL | Hexcel Corp | 0.15 | 1.17 | 1.05 |
| KAMN | Kaman Corp | 0.43 | 1.44 | 1.1 |
| KTOS | Kratos Defense and Security Solutions Inc | 0.03 | 1.41 | 1.38 |
| Low | High | |
| Unlevered beta | 0.59 | 0.87 |
| Relevered beta | 0.67 | 0.99 |
| Adjusted relevered beta | 0.78 | 0.99 |
MRCY'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 MRCY:
cost_of_equity (8.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.78) + 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.