The WACC of SigmaTron International Inc (SGMA) is 12.3%.
| Range | Selected | |
| Cost of equity | 23.20% - 35.10% | 29.15% |
| Tax rate | 19.90% - 24.30% | 22.10% |
| Cost of debt | 6.80% - 20.90% | 13.85% |
| WACC | 7.1% - 17.6% | 12.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 4.2 | 5.4 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 23.20% | 35.10% |
| Tax rate | 19.90% | 24.30% |
| Debt/Equity ratio | 9.72 | 9.72 |
| Cost of debt | 6.80% | 20.90% |
| After-tax WACC | 7.1% | 17.6% |
| Selected WACC | 12.3% | |
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 SGMA:
cost_of_equity (29.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (4.2) + 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.