MTOR
Meritor Inc
Price:  
36.50 
USD
Volume:  
2,560,090.00
United States | Machinery
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Meritor WACC - Weighted Average Cost of Capital

The WACC of Meritor Inc (MTOR) is 8.0%.

The Cost of Equity of Meritor Inc (MTOR) is 9.60%.
The Cost of Debt of Meritor Inc (MTOR) is 5.00%.

Range Selected
Cost of equity 8.00% - 11.20% 9.60%
Tax rate 18.40% - 22.00% 20.20%
Cost of debt 4.90% - 5.10% 5.00%
WACC 6.8% - 9.2% 8.0%
WACC

Meritor WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.89 1.13
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.00% 11.20%
Tax rate 18.40% 22.00%
Debt/Equity ratio 0.4 0.4
Cost of debt 4.90% 5.10%
After-tax WACC 6.8% 9.2%
Selected WACC 8.0%

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 (9.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.89) + 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.