RBC WACC - Weighted Average Cost of Capital
The WACC of Regal Beloit Corp (RBC) is 8.9%.
| Range | Selected | |
| Cost of equity | 7.9% - 10.7% | 9.3% |
| Tax rate | 20.5% - 20.7% | 20.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.6% - 10.2% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.87 | 1.05 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.9% | 10.7% |
| Tax rate | 20.5% | 20.7% |
| Debt/Equity ratio | 0.08 | 0.08 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.6% | 10.2% |
| Selected WACC | 8.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| RBC | Regal Beloit Corp | 0.08 | 1.02 | 0.96 |
| APWC | Asia Pacific Wire & Cable Corporation Ltd | 0.88 | 0.15 | 0.09 |
| ATKR | Atkore Inc | 0.31 | 1.43 | 1.15 |
| AYI | Acuity Brands Inc | 0.06 | 1.33 | 1.27 |
| ENS | EnerSys | 0.33 | 1.24 | 0.98 |
| FCEL | Fuelcell Energy Inc | 1.09 | -0.02 | -0.01 |
| NVT | nVent Electric PLC | 0.17 | 1.97 | 1.73 |
| OESX | Orion Energy Systems Inc | 0.54 | 0.65 | 0.45 |
| RUN | Sunrun Inc | 5.55 | 0.93 | 0.17 |
| ST | Sensata Technologies Holding PLC | 0.69 | 1.62 | 1.04 |
| Low | High | |
| Unlevered beta | 0.75 | 1.01 |
| Relevered beta | 0.81 | 1.07 |
| Adjusted relevered beta | 0.87 | 1.05 |
RBC'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 RBC:
cost_of_equity (9.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.87) + 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.