PSMT
PriceSmart Inc
Price:  
107.98 
USD
Volume:  
338,865.00
United States | Food & Staples Retailing
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PriceSmart WACC - Weighted Average Cost of Capital

The WACC of PriceSmart Inc (PSMT) is 7.9%.

The Cost of Equity of PriceSmart Inc (PSMT) is 8.05%.
The Cost of Debt of PriceSmart Inc (PSMT) is 5.65%.

Range Selected
Cost of equity 7.00% - 9.10% 8.05%
Tax rate 32.90% - 33.20% 33.05%
Cost of debt 4.50% - 6.80% 5.65%
WACC 6.9% - 8.9% 7.9%
WACC

PriceSmart WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.69 0.75
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.00% 9.10%
Tax rate 32.90% 33.20%
Debt/Equity ratio 0.04 0.04
Cost of debt 4.50% 6.80%
After-tax WACC 6.9% 8.9%
Selected WACC 7.9%

PriceSmart'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 PriceSmart:

cost_of_equity (8.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.69) + 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.