RAD WACC - Weighted Average Cost of Capital

The WACC of Rite Aid Corp (RAD) is 11.7%.

The Cost of Equity of Rite Aid Corp (RAD) is 25.50%.

The Cost of Debt of Rite Aid Corp (RAD) is 13.30%.

	Range	Selected
Cost of equity	8.40% - 42.60%	25.50%
Tax rate	8.20% - 14.50%	11.35%
Cost of debt	6.40% - 20.20%	13.30%
WACC	5.9% - 17.6%	11.7%

WACC

RAD WACC calculation

Category	Low	High

Long-term bond rate	4.2%	4.7%
Equity market risk premium	5.0%	6.0%
Adjusted beta	0.84	6.24

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.40%	42.60%

Tax rate	8.20%	14.50%
Debt/Equity ratio	80.09	80.09
Cost of debt	6.40%	20.20%

After-tax WACC	5.9%	17.6%


Selected WACC	11.7%

RAD'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 RAD:

cost_of_equity (25.50%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.84) + 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.