The WACC of Philip Morris International Inc (PM) is 6.7%.
Range | Selected | |
Cost of equity | 6.1% - 8.3% | 7.2% |
Tax rate | 21.8% - 22.1% | 21.95% |
Cost of debt | 4.0% - 4.8% | 4.4% |
WACC | 5.7% - 7.6% | 6.7% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.49 | 0.61 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.1% | 8.3% |
Tax rate | 21.8% | 22.1% |
Debt/Equity ratio | 0.16 | 0.16 |
Cost of debt | 4.0% | 4.8% |
After-tax WACC | 5.7% | 7.6% |
Selected WACC | 6.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
PM | Philip Morris International Inc | 0.16 | 0.04 | 0.03 |
MO | Altria Group Inc | 0.26 | -0.02 | -0.01 |
NHLE | Nhale Inc | 0.72 | 1.01 | 0.65 |
RLX | RLX Technology Inc | 0.01 | 0.53 | 0.52 |
TPB | Turning Point Brands Inc | 0.19 | 0.6 | 0.52 |
TRIP.CN | Red Light Holland Corp | 0.14 | 1.5 | 1.36 |
UVV | Universal Corp | 0.74 | 0.32 | 0.2 |
VGR | Vector Group Ltd | 0.58 | 0.19 | 0.13 |
VHUB | Vapor Hub International Inc | 3.84 | 1.04 | 0.26 |
BATS.L | British American Tobacco PLC | 0.47 | 0.29 | 0.22 |
Low | High | |
Unlevered beta | 0.21 | 0.36 |
Relevered beta | 0.24 | 0.42 |
Adjusted relevered beta | 0.49 | 0.61 |
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 PM:
cost_of_equity (7.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.49) + 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.