The WACC of MusclePharm Corp (MSLP) is 14.0%.
| Range | Selected | |
| Cost of equity | 107.40% - 374.90% | 241.15% |
| Tax rate | 0.40% - 0.50% | 0.45% |
| Cost of debt | 7.00% - 20.50% | 13.75% |
| WACC | 7.1% - 20.9% | 14.0% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 20.65 | 61.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 107.40% | 374.90% |
| Tax rate | 0.40% | 0.50% |
| Debt/Equity ratio | 699.35 | 699.35 |
| Cost of debt | 7.00% | 20.50% |
| After-tax WACC | 7.1% | 20.9% |
| Selected WACC | 14.0% | |
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 MSLP:
cost_of_equity (241.15%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (20.65) + 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.