PBCT WACC - Weighted Average Cost of Capital
The WACC of People's United Financial Inc (PBCT) is 8.0%.
| Range | Selected | |
| Cost of equity | 7.4% - 9.8% | 8.6% |
| Tax rate | 20.3% - 23.9% | 22.1% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.9% - 9.0% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1 | 1.08 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.4% | 9.8% |
| Tax rate | 20.3% | 23.9% |
| Debt/Equity ratio | 0.17 | 0.17 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.9% | 9.0% |
| Selected WACC | 8.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PBCT | People's United Financial Inc | 0.17 | 0.95 | 0.84 |
| BOKF | BOK Financial Corp | 0.22 | 0.95 | 0.81 |
| BPOP | Popular Inc | 0.11 | 1.04 | 0.95 |
| CBSH | Commerce Bancshares Inc | 0.34 | 0.82 | 0.65 |
| CMA | Comerica Inc | 0.32 | 1.21 | 0.97 |
| FCNCA | First Citizens BancShares Inc (Delaware) | 1.28 | 1.21 | 0.6 |
| FHN | First Horizon Corp (Tennessee) | 0.41 | 1.42 | 1.07 |
| SNV | Synovus Financial Corp | 0.24 | 1.59 | 1.33 |
| TCF | TCF Financial Corp | 0.19 | 1.92 | 1.67 |
| UMBF | UMB Financial Corp | 0.36 | 1.19 | 0.93 |
| Low | High | |
| Unlevered beta | 0.89 | 0.96 |
| Relevered beta | 1 | 1.12 |
| Adjusted relevered beta | 1 | 1.08 |
PBCT'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 PBCT:
cost_of_equity (8.60%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * 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.