The WACC of Park City Group Inc (PCYG) is 7.0%.
| Range | Selected | |
| Cost of equity | 6.00% - 7.90% | 6.95% |
| Tax rate | 2.90% - 3.30% | 3.10% |
| Cost of debt | 4.00% - 4.90% | 4.45% |
| WACC | 6.0% - 7.9% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.37 | 0.46 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.00% | 7.90% |
| Tax rate | 2.90% | 3.30% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 4.00% | 4.90% |
| After-tax WACC | 6.0% | 7.9% |
| Selected WACC | 7.0% | |
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 PCYG:
cost_of_equity (6.95%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.37) + 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.