The WACC of Penn National Gaming Inc (PENN) is 12.3%.
| Range | Selected | |
| Cost of equity | 13.30% - 19.80% | 16.55% |
| Tax rate | 15.20% - 20.70% | 17.95% |
| Cost of debt | 6.80% - 20.90% | 13.85% |
| WACC | 7.3% - 17.2% | 12.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 2.05 | 2.66 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.30% | 19.80% |
| Tax rate | 15.20% | 20.70% |
| Debt/Equity ratio | 3.83 | 3.83 |
| Cost of debt | 6.80% | 20.90% |
| After-tax WACC | 7.3% | 17.2% |
| Selected WACC | 12.3% | |
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 PENN:
cost_of_equity (16.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (2.05) + 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.