The WACC of Seven Arts Entertainment Inc (SAPX) is 3.8%.
| Range | Selected | |
| Cost of equity | 6.80% - 40.80% | 23.80% |
| Tax rate | 27.00% - 27.00% | 27.00% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.7% - 4.0% | 3.8% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.85 | 6.99 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.80% | 40.80% |
| Tax rate | 27.00% | 27.00% |
| Debt/Equity ratio | 99.78 | 99.78 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.7% | 4.0% |
| Selected WACC | 3.8% | |
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 SAPX:
cost_of_equity (23.80%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.85) + 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.