The WACC of Party City Holdco Inc (PRTY) is 6.1%.
| Range | Selected | |
| Cost of equity | 15.20% - 56.70% | 35.95% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 4.00% - 10.20% | 7.10% |
| WACC | 3.3% - 8.9% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 2.2 | 8.6 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 15.20% | 56.70% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 33.88 | 33.88 |
| Cost of debt | 4.00% | 10.20% |
| After-tax WACC | 3.3% | 8.9% |
| Selected WACC | 6.1% | |
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 PRTY:
cost_of_equity (35.95%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (2.2) + 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.