NTRS WACC - Weighted Average Cost of Capital

The WACC of Northern Trust Corp (NTRS) is 11.1%.

The Cost of Equity of Northern Trust Corp (NTRS) is 15.00%.

The Cost of Debt of Northern Trust Corp (NTRS) is 13.95%.

	Range	Selected
Cost of equity	12.40% - 17.60%	15.00%
Tax rate	24.10% - 24.40%	24.25%
Cost of debt	4.00% - 23.90%	13.95%
WACC	4.3% - 18.0%	11.1%

WACC

NTRS WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	1.85	2.28

Additional risk adjustments	0.0%	0.5%
Cost of equity	12.40%	17.60%

Tax rate	24.10%	24.40%
Debt/Equity ratio	6.6	6.6
Cost of debt	4.00%	23.90%

After-tax WACC	4.3%	18.0%


Selected WACC	11.1%

NTRS'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 NTRS:

cost_of_equity (15.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.85) + 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.