The WACC of ReShape Lifesciences Inc (RSLS) is 8.4%.
Range | Selected | |
Cost of equity | 6.9% - 9.9% | 8.4% |
Tax rate | 0.4% - 0.5% | 0.45% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.9% - 9.9% | 8.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.67 | 0.9 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.9% | 9.9% |
Tax rate | 0.4% | 0.5% |
Debt/Equity ratio | 0.01 | 0.01 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.9% | 9.9% |
Selected WACC | 8.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
RSLS | ReShape Lifesciences Inc | 0.01 | 1.22 | 1.21 |
ASG.V | Aurora Spine Corp | 0.22 | 0.9 | 0.74 |
CHFS | CHF Solutions Inc | 0 | 1.32 | 1.32 |
ECIA | Encision Inc | 0.05 | 0.56 | 0.53 |
ESMC | Escalon Medical Corp | 0.22 | 1.21 | 0.99 |
MICR | Micron Solutions Inc | 0.75 | -0.24 | -0.14 |
NSCI.V | Nanalysis Scientific Corp | 0.75 | -0.22 | -0.12 |
NVCN.TO | Neovasc Inc | 0.13 | 1.98 | 1.76 |
OBLN | Obalon Therapeutics Inc | 0.01 | -1.24 | -1.23 |
PEYE | Precision Optics Corporation Inc | 0.09 | 0.49 | 0.45 |
Low | High | |
Unlevered beta | 0.5 | 0.84 |
Relevered beta | 0.51 | 0.85 |
Adjusted relevered beta | 0.67 | 0.9 |
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 RSLS:
cost_of_equity (8.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.67) + 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.