The WACC of Rayonier Advanced Materials Inc (RYAM) is 10.6%.
| Range | Selected | |
| Cost of equity | 13.80% - 19.70% | 16.75% |
| Tax rate | 21.90% - 31.40% | 26.65% |
| Cost of debt | 7.20% - 15.60% | 11.40% |
| WACC | 7.9% - 13.2% | 10.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 2.16 | 2.65 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.80% | 19.70% |
| Tax rate | 21.90% | 31.40% |
| Debt/Equity ratio | 2.61 | 2.61 |
| Cost of debt | 7.20% | 15.60% |
| After-tax WACC | 7.9% | 13.2% |
| Selected WACC | 10.6% | |
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 RYAM:
cost_of_equity (16.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (2.16) + 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.