Paccar WACC - Weighted Average Cost of Capital
The WACC of Paccar Inc (PCAR) is 8.5%.
| Range | Selected | |
| Cost of equity | 8.9% - 11.3% | 10.1% |
| Tax rate | 21.7% - 21.9% | 21.8% |
| Cost of debt | 4.0% - 4.8% | 4.4% |
| WACC | 7.5% - 9.5% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.09 | 1.16 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.9% | 11.3% |
| Tax rate | 21.7% | 21.9% |
| Debt/Equity ratio | 0.32 | 0.32 |
| Cost of debt | 4.0% | 4.8% |
| After-tax WACC | 7.5% | 9.5% |
| Selected WACC | 8.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PCAR | Paccar Inc | 0.32 | 0.81 | 0.65 |
| ALSN | Allison Transmission Holdings Inc | 0.3 | 1.03 | 0.84 |
| CMI | Cummins Inc | 0.16 | 1.14 | 1.01 |
| GBX | Greenbrier Companies Inc | 1.2 | 0.79 | 0.41 |
| MTOR | Meritor Inc | 0.4 | 1.53 | 1.17 |
| NAV | Navistar International Corp | 1.2 | 1.88 | 0.97 |
| NFI.TO | NFI Group Inc | 0.78 | 0.61 | 0.38 |
| OSK | Oshkosh Corp | 0.14 | 1.34 | 1.21 |
| TEX | Terex Corp | 0.83 | 1.56 | 0.95 |
| WAB | Westinghouse Air Brake Technologies Corp | 0.11 | 1.23 | 1.13 |
| Low | High | |
| Unlevered beta | 0.9 | 0.99 |
| Relevered beta | 1.13 | 1.24 |
| Adjusted relevered beta | 1.09 | 1.16 |
Paccar'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 Paccar:
cost_of_equity (10.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.09) + 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.