The WACC of Overstock.com Inc (OSTK) is 8.6%.
| Range | Selected | |
| Cost of equity | 7.50% - 9.80% | 8.65% |
| Tax rate | 1.60% - 2.70% | 2.15% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 7.5% - 9.7% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.67 | 0.78 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.50% | 9.80% |
| Tax rate | 1.60% | 2.70% |
| Debt/Equity ratio | 0.05 | 0.05 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 7.5% | 9.7% |
| Selected WACC | 8.6% | |
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 OSTK:
cost_of_equity (8.65%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.67) + 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.