PBIP WACC - Weighted Average Cost of Capital
The WACC of Prudential Bancorp Inc (PBIP) is 6.4%.
| Range | Selected | |
| Cost of equity | 7.5% - 9.8% | 8.65% |
| Tax rate | 16.6% - 18.2% | 17.4% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.8% - 6.9% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.01 | 1.07 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.5% | 9.8% |
| Tax rate | 16.6% | 18.2% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.8% | 6.9% |
| Selected WACC | 6.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PBIP | Prudential Bancorp Inc | 1.01 | 0.13 | 0.07 |
| CFBK | CF Bankshares Inc | 0.32 | 1.15 | 0.91 |
| CNF | CNFinance Holdings Ltd | 20.08 | 1.54 | 0.09 |
| ESBK | Elmira Savings Bank | 0.35 | 0.93 | 0.72 |
| GFED | Guaranty Federal Bancshares Inc | 0.22 | 0.6 | 0.51 |
| IROQ | IF Bancorp Inc | 0.52 | -0.04 | -0.03 |
| NECB | Northeast Community Bancorp Inc | 0 | 0.9 | 0.9 |
| RVSB | Riverview Bancorp Inc | 0.24 | 0.25 | 0.2 |
| STND | Standard AVB Financial Corp | 0.04 | 0.22 | 0.22 |
| SVBI | Severn Bancorp Inc | 0.12 | 0.79 | 0.72 |
| WAYN | Wayne Savings Bancshares Inc | 0.31 | 0.21 | 0.17 |
| Low | High | |
| Unlevered beta | 0.2 | 0.51 |
| Relevered beta | 1.01 | 1.1 |
| Adjusted relevered beta | 1.01 | 1.07 |
PBIP'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 PBIP:
cost_of_equity (8.65%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * 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.