OCC WACC - Weighted Average Cost of Capital

The WACC of Optical Cable Corp (OCC) is 9.0%.

The Cost of Equity of Optical Cable Corp (OCC) is 9.50%.

The Cost of Debt of Optical Cable Corp (OCC) is 7.30%.

	Range	Selected
Cost of equity	7.90% - 11.10%	9.50%
Tax rate	0.40% - 2.80%	1.60%
Cost of debt	7.00% - 7.60%	7.30%
WACC	7.7% - 10.3%	9.0%

WACC

OCC 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	1.11

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.90%	11.10%

Tax rate	0.40%	2.80%
Debt/Equity ratio	0.28	0.28
Cost of debt	7.00%	7.60%

After-tax WACC	7.7%	10.3%


Selected WACC	9.0%

OCC'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 OCC:

cost_of_equity (9.50%) = 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.