RXT WACC - Weighted Average Cost of Capital
The WACC of Rackspace Technology Inc (RXT) is 7.9%.
| Range | Selected | |
| Cost of equity | 27.7% - 46.9% | 37.3% |
| Tax rate | 7.3% - 11.2% | 9.25% |
| Cost of debt | 4.5% - 7.0% | 5.75% |
| WACC | 6.2% - 9.7% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 5.18 | 7.51 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 27.7% | 46.9% |
| Tax rate | 7.3% | 11.2% |
| Debt/Equity ratio | 10.83 | 10.83 |
| Cost of debt | 4.5% | 7.0% |
| After-tax WACC | 6.2% | 9.7% |
| Selected WACC | 7.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| RXT | Rackspace Technology Inc | 10.83 | 1.67 | 0.16 |
| AKAM | Akamai Technologies Inc | 0.31 | 0.72 | 0.56 |
| FSLY | Fastly Inc | 0.29 | 2.02 | 1.6 |
| GDDY | GoDaddy Inc | 0.14 | 0.85 | 0.75 |
| MDB | MongoDB Inc | 0 | 1.77 | 1.77 |
| OKTA | Okta Inc | 0.04 | 1.15 | 1.11 |
| SQSP | Squarespace Inc | 0.09 | 1 | 0.93 |
| SWCH | Switch Inc | 0.2 | 0.6 | 0.51 |
| TWLO | Twilio Inc | 0.06 | 1.33 | 1.27 |
| VRSN | Verisign Inc | 0.07 | 0.51 | 0.48 |
| Low | High | |
| Unlevered beta | 0.68 | 1 |
| Relevered beta | 7.24 | 10.72 |
| Adjusted relevered beta | 5.18 | 7.51 |
RXT'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 RXT:
cost_of_equity (37.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (5.18) + 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.