Meritor WACC - Weighted Average Cost of Capital
The WACC of Meritor Inc (MTOR) is 7.9%.
| Range | Selected | |
| Cost of equity | 7.8% - 11.0% | 9.4% |
| Tax rate | 18.4% - 22.0% | 20.2% |
| Cost of debt | 4.9% - 5.1% | 5% |
| WACC | 6.7% - 9.0% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.85 | 1.1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.8% | 11.0% |
| Tax rate | 18.4% | 22.0% |
| Debt/Equity ratio | 0.4 | 0.4 |
| Cost of debt | 4.9% | 5.1% |
| After-tax WACC | 6.7% | 9.0% |
| Selected WACC | 7.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| MTOR | Meritor Inc | 0.4 | 1.53 | 1.17 |
| ALG | Alamo Group Inc | 0.08 | 0.77 | 0.72 |
| ALSN | Allison Transmission Holdings Inc | 0.3 | 1.03 | 0.84 |
| GBX | Greenbrier Companies Inc | 1.2 | 0.79 | 0.41 |
| MTW | Manitowoc Company Inc | 0.9 | 1.88 | 1.11 |
| NFI.TO | NFI Group Inc | 0.78 | 0.61 | 0.38 |
| REVG | REV Group Inc | 0.04 | 1.62 | 1.58 |
| TEX | Terex Corp | 0.83 | 1.56 | 0.95 |
| TRN | Trinity Industries Inc | 2.58 | 1.04 | 0.34 |
| WNC | Wabash National Corp | 0.88 | 0.67 | 0.4 |
| Low | High | |
| Unlevered beta | 0.6 | 0.88 |
| Relevered beta | 0.78 | 1.15 |
| Adjusted relevered beta | 0.85 | 1.1 |
Meritor'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 Meritor:
cost_of_equity (9.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.85) + 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.