The WACC of Optical Cable Corp (OCC) is 8.8%.
Range | Selected | |
Cost of equity | 7.9% - 11.3% | 9.6% |
Tax rate | 0.4% - 2.8% | 1.6% |
Cost of debt | 7.0% - 7.6% | 7.3% |
WACC | 7.6% - 10.1% | 8.8% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.87 | 1.15 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.9% | 11.3% |
Tax rate | 0.4% | 2.8% |
Debt/Equity ratio | 0.46 | 0.46 |
Cost of debt | 7.0% | 7.6% |
After-tax WACC | 7.6% | 10.1% |
Selected WACC | 8.8% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
OCC | Optical Cable Corp | 0.46 | 1.2 | 0.82 |
BDR | Blonder Tongue Laboratories Inc | 0.99 | 0.65 | 0.33 |
CIEN | Ciena Corp | 0.14 | 1.88 | 1.65 |
CMI.V | C-Com Satellite Systems Inc | 0.03 | 0.9 | 0.87 |
CSCO | Cisco Systems Inc | 0.11 | 1.01 | 0.91 |
LTE.V | Lite Access Technologies Inc | 0.08 | -0.1 | -0.09 |
LTRX | Lantronix Inc | 0.14 | 0.8 | 0.7 |
PCTI | PCTEL Inc | 0 | -0.35 | -0.35 |
UI | Ubiquiti Inc | 0.03 | 1.41 | 1.37 |
XCOMQ | Xtera Communications Inc | 745644.6 | -1.16 | 0 |
Low | High | |
Unlevered beta | 0.55 | 0.84 |
Relevered beta | 0.81 | 1.22 |
Adjusted relevered beta | 0.87 | 1.15 |
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 OCC:
cost_of_equity (9.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.87) + 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.