PAYX
Paychex Inc
Price:  
126.56 
USD
Volume:  
2,460,147.00
United States | IT Services
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Paychex WACC - Weighted Average Cost of Capital

The WACC of Paychex Inc (PAYX) is 7.5%.

The Cost of Equity of Paychex Inc (PAYX) is 7.95%.
The Cost of Debt of Paychex Inc (PAYX) is 4.50%.

Range Selected
Cost of equity 7.00% - 8.90% 7.95%
Tax rate 23.70% - 23.80% 23.75%
Cost of debt 4.50% - 4.50% 4.50%
WACC 6.7% - 8.3% 7.5%
WACC

Paychex WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.69 0.72
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.00% 8.90%
Tax rate 23.70% 23.80%
Debt/Equity ratio 0.11 0.11
Cost of debt 4.50% 4.50%
After-tax WACC 6.7% 8.3%
Selected WACC 7.5%

Paychex'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 Paychex:

cost_of_equity (7.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.69) + 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.