The WACC of Rowe Co (ROWC) is 2.9%.
| Range | Selected | |
| Cost of equity | 131.50% - 1,430.30% | 780.90% |
| Tax rate | 36.80% - 39.70% | 38.25% |
| Cost of debt | 4.00% - 5.10% | 4.55% |
| WACC | 2.6% - 3.3% | 2.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 27.75 | 254.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 131.50% | 1,430.30% |
| Tax rate | 36.80% | 39.70% |
| Debt/Equity ratio | 5148.04 | 5148.04 |
| Cost of debt | 4.00% | 5.10% |
| After-tax WACC | 2.6% | 3.3% |
| Selected WACC | 2.9% | |
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 ROWC:
cost_of_equity (780.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (27.75) + 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.