OTTR
Otter Tail Corp
Price:  
76.54 
USD
Volume:  
455,770.00
United States | Electric Utilities
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OTTR WACC - Weighted Average Cost of Capital

The WACC of Otter Tail Corp (OTTR) is 6.8%.

The Cost of Equity of Otter Tail Corp (OTTR) is 7.55%.
The Cost of Debt of Otter Tail Corp (OTTR) is 5.65%.

Range Selected
Cost of equity 6.50% - 8.60% 7.55%
Tax rate 17.60% - 18.30% 17.95%
Cost of debt 4.30% - 7.00% 5.65%
WACC 5.8% - 7.9% 6.8%
WACC

OTTR WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.58 0.66
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.50% 8.60%
Tax rate 17.60% 18.30%
Debt/Equity ratio 0.32 0.32
Cost of debt 4.30% 7.00%
After-tax WACC 5.8% 7.9%
Selected WACC 6.8%

OTTR'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 OTTR:

cost_of_equity (7.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.58) + 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.