PM
Philip Morris International Inc
Price:  
180.75 
USD
Volume:  
5,598,443
United States | Tobacco

PM WACC - Weighted Average Cost of Capital

The WACC of Philip Morris International Inc (PM) is 6.7%.

The Cost of Equity of Philip Morris International Inc (PM) is 7.2%.
The Cost of Debt of Philip Morris International Inc (PM) is 4.4%.

RangeSelected
Cost of equity6.1% - 8.3%7.2%
Tax rate21.8% - 22.1%21.95%
Cost of debt4.0% - 4.8%4.4%
WACC5.7% - 7.6%6.7%
WACC

PM WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.490.61
Additional risk adjustments0.0%0.5%
Cost of equity6.1%8.3%
Tax rate21.8%22.1%
Debt/Equity ratio
0.160.16
Cost of debt4.0%4.8%
After-tax WACC5.7%7.6%
Selected WACC6.7%

PM'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 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.