OTIS
Otis Worldwide Corp
Price:  
99.02 
USD
Volume:  
2,350,412.00
United States | Machinery
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Otis WACC - Weighted Average Cost of Capital

The WACC of Otis Worldwide Corp (OTIS) is 8.8%.

The Cost of Equity of Otis Worldwide Corp (OTIS) is 10.00%.
The Cost of Debt of Otis Worldwide Corp (OTIS) is 4.30%.

Range Selected
Cost of equity 8.50% - 11.50% 10.00%
Tax rate 27.00% - 27.50% 27.25%
Cost of debt 4.00% - 4.60% 4.30%
WACC 7.5% - 10.0% 8.8%
WACC

Otis WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.01 1.18
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.50% 11.50%
Tax rate 27.00% 27.50%
Debt/Equity ratio 0.22 0.22
Cost of debt 4.00% 4.60%
After-tax WACC 7.5% 10.0%
Selected WACC 8.8%

Otis'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 Otis:

cost_of_equity (10.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.01) + 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.