PSIX WACC - Weighted Average Cost of Capital
The WACC of Power Solutions International Inc (PSIX) is 8.3%.
| Range | Selected | |
| Cost of equity | 7.5% - 10.2% | 8.85% |
| Tax rate | 2.1% - 2.9% | 2.5% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.1% - 9.4% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.78 | 0.96 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.5% | 10.2% |
| Tax rate | 2.1% | 2.9% |
| Debt/Equity ratio | 0.17 | 0.17 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.1% | 9.4% |
| Selected WACC | 8.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PSIX | Power Solutions International Inc | 0.17 | 3.47 | 2.97 |
| AZZ | AZZ Inc | 0.31 | 1.38 | 1.06 |
| BE | Bloom Energy Corp | 0.34 | 1.67 | 1.25 |
| BWEN | Broadwind Inc | 0.42 | 0.33 | 0.23 |
| CETY | Clean Energy Technologies Inc | 0.19 | 0.9 | 0.76 |
| EHT.V | EnerDynamic Hybrid Technologies Corp | 1.92 | 1.02 | 0.35 |
| GCHT | Gc China Turbine Corp | 0.6 | 0 | 0 |
| PLPC | Preformed Line Products Co | 0.04 | 0.76 | 0.73 |
| POLA | Polar Power Inc | 1.09 | 1.79 | 0.87 |
| PPSI | Pioneer Power Solutions Inc | 0.02 | 1.71 | 1.68 |
| TPIC | TPI Composites Inc | 14.89 | 1.06 | 0.07 |
| Low | High | |
| Unlevered beta | 0.73 | 0.87 |
| Relevered beta | 0.67 | 0.94 |
| Adjusted relevered beta | 0.78 | 0.96 |
PSIX'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 PSIX:
cost_of_equity (8.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.78) + 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.