The WACC of Renewable Energy Group Inc (REGI) is 6.1%.
| Range | Selected | |
| Cost of equity | 4.80% - 7.10% | 5.95% |
| Tax rate | 3.50% - 5.70% | 4.60% |
| Cost of debt | 4.00% - 10.50% | 7.25% |
| WACC | 4.6% - 7.6% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.38 | 0.57 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.80% | 7.10% |
| Tax rate | 3.50% | 5.70% |
| Debt/Equity ratio | 0.17 | 0.17 |
| Cost of debt | 4.00% | 10.50% |
| After-tax WACC | 4.6% | 7.6% |
| Selected WACC | 6.1% | |
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 REGI:
cost_of_equity (5.95%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.38) + 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.