Arcus WACC - Weighted Average Cost of Capital
The WACC of Arcus Biosciences Inc (RCUS) is 7.3%.
| Range | Selected | |
| Cost of equity | 6.3% - 8.3% | 7.3% |
| Tax rate | 0.4% - 1.0% | 0.7% |
| Cost of debt | 7.0% - 7.0% | 7% |
| WACC | 6.3% - 8.2% | 7.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.53 | 0.62 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.3% | 8.3% |
| Tax rate | 0.4% | 1.0% |
| Debt/Equity ratio | 0.05 | 0.05 |
| Cost of debt | 7.0% | 7.0% |
| After-tax WACC | 6.3% | 8.2% |
| Selected WACC | 7.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| RCUS | Arcus Biosciences Inc | 0.05 | 2.27 | 2.15 |
| ABBV | Abbvie Inc | 0.21 | 0.35 | 0.29 |
| ADCT | ADC Therapeutics SA | 3.44 | 1.76 | 0.4 |
| AMGN | Amgen Inc | 0.42 | 0.35 | 0.25 |
| AMTI | Applied Molecular Transport Inc. | 0.05 | 0.47 | 0.45 |
| FGEN | FibroGen Inc | 2.9 | 0.8 | 0.21 |
| GBT | Global Blood Therapeutics Inc | 0.13 | 0.47 | 0.41 |
| GILD | Gilead Sciences Inc | 0.22 | 0.32 | 0.26 |
| IMCR | Immunocore Holdings PLC | 0.37 | 0.6 | 0.44 |
| LGND | Ligand Pharmaceuticals Inc | 0 | 1.11 | 1.11 |
| PRLD | Prelude Therapeutics Inc | 0 | 0.19 | 0.19 |
| Low | High | |
| Unlevered beta | 0.29 | 0.41 |
| Relevered beta | 0.3 | 0.43 |
| Adjusted relevered beta | 0.53 | 0.62 |
Arcus'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 Arcus:
cost_of_equity (7.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.53) + 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.