OTIS
Otis Worldwide Corp
Price:  
99.44 
USD
Volume:  
2,211,342
United States | Machinery

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 9.95%.
The Cost of Debt of Otis Worldwide Corp (OTIS) is 4.3%.

RangeSelected
Cost of equity8.4% - 11.5%9.95%
Tax rate27.0% - 27.5%27.25%
Cost of debt4.0% - 4.6%4.3%
WACC7.5% - 10.1%8.8%
WACC

Otis WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta11.19
Additional risk adjustments0.0%0.5%
Cost of equity8.4%11.5%
Tax rate27.0%27.5%
Debt/Equity ratio
0.210.21
Cost of debt4.0%4.6%
After-tax WACC7.5%10.1%
Selected WACC8.8%

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 (9.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1) + 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.