The WACC of SharpSpring Inc (SHSP) is 8.3%.
| Range | Selected | |
| Cost of equity | 7.10% - 9.50% | 8.30% |
| Tax rate | 12.90% - 22.20% | 17.55% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 7.1% - 9.4% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.92 | 1.03 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.10% | 9.50% |
| Tax rate | 12.90% | 22.20% |
| Debt/Equity ratio | 0.02 | 0.02 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 7.1% | 9.4% |
| Selected WACC | 8.3% | |
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 SHSP:
cost_of_equity (8.30%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.92) + 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.