The WACC of NXT-ID Inc (NXTD) is 8.0%.
| Range | Selected | |
| Cost of equity | 4.60% - 6.90% | 5.75% |
| Tax rate | 1.80% - 2.10% | 1.95% |
| Cost of debt | 7.00% - 18.70% | 12.85% |
| WACC | 5.3% - 10.7% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.33 | 0.52 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.60% | 6.90% |
| Tax rate | 1.80% | 2.10% |
| Debt/Equity ratio | 0.49 | 0.49 |
| Cost of debt | 7.00% | 18.70% |
| After-tax WACC | 5.3% | 10.7% |
| Selected WACC | 8.0% | |
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 NXTD:
cost_of_equity (5.75%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.33) + 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.