Spirit WACC - Weighted Average Cost of Capital
The WACC of Spirit Airlines Inc (SAVE) is 6.2%.
| Range | Selected | |
| Cost of equity | 126.9% - 170.9% | 148.9% |
| Tax rate | 20.5% - 21.3% | 20.9% |
| Cost of debt | 4.0% - 7.0% | 5.5% |
| WACC | 4.8% - 7.6% | 6.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 26.74 | 29.65 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 126.9% | 170.9% |
| Tax rate | 20.5% | 21.3% |
| Debt/Equity ratio | 76.94 | 76.94 |
| Cost of debt | 4.0% | 7.0% |
| After-tax WACC | 4.8% | 7.6% |
| Selected WACC | 6.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SAVE | Spirit Airlines Inc | 76.94 | 0.81 | 0.01 |
| AEGN.AT | Aegean Airlines SA | 1.3 | 1.3 | 0.64 |
| AIR.L | Air Partner PLC | 0.09 | 1.04 | 0.98 |
| PGSUS.IS | Pegasus Hava Tasimaciligi AS | 2.14 | 1.82 | 0.68 |
| ALGT | Allegiant Travel Co | 2.03 | 1.47 | 0.56 |
| CPA | Copa Holdings SA | 0.45 | 0.51 | 0.37 |
| EIF.TO | Exchange Income Corp | 0.73 | 1 | 0.63 |
| HA | Hawaiian Holdings Inc | 1.76 | 1.81 | 0.75 |
| SKYW | SkyWest Inc | 0.64 | 1.09 | 0.73 |
| ULCC | Frontier Group Holdings Inc | 0.61 | 1.82 | 1.23 |
| Low | High | |
| Unlevered beta | 0.64 | 0.7 |
| Relevered beta | 39.42 | 43.76 |
| Adjusted relevered beta | 26.74 | 29.65 |
Spirit'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 Spirit:
cost_of_equity (148.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (26.74) + 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.