NWBI WACC - Weighted Average Cost of Capital
The WACC of Northwest Bancshares Inc (NWBI) is 8.3%.
| Range | Selected | |
| Cost of equity | 7.8% - 10.2% | 9% |
| Tax rate | 22.8% - 23.0% | 22.9% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.2% - 9.4% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.85 | 0.96 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.8% | 10.2% |
| Tax rate | 22.8% | 23.0% |
| Debt/Equity ratio | 0.15 | 0.15 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.2% | 9.4% |
| Selected WACC | 8.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| NWBI | Northwest Bancshares Inc | 0.15 | 0.69 | 0.62 |
| CASH | Meta Financial Group Inc | 0.21 | 1.03 | 0.88 |
| FBC | Flagstar Bancorp Inc | 0.44 | 1.5 | 1.12 |
| HMST | HomeStreet Inc | 3.24 | 0.25 | 0.07 |
| MBIN | Merchants Bancorp | 0.14 | 0.9 | 0.81 |
| NMIH | NMI Holdings Inc | 0.14 | 0.56 | 0.51 |
| PFS | Provident Financial Services Inc | 0.23 | 0.86 | 0.74 |
| SNFCA | Security National Financial Corp | 0.44 | 1.53 | 1.14 |
| WAFD | Washington Federal Inc | 0.02 | 0.59 | 0.58 |
| WSFS | WSFS Financial Corp | 0.1 | 1 | 0.92 |
| Low | High | |
| Unlevered beta | 0.69 | 0.84 |
| Relevered beta | 0.78 | 0.94 |
| Adjusted relevered beta | 0.85 | 0.96 |
NWBI'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 NWBI:
cost_of_equity (9.00%) = 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.