SMP
Standard Motor Products Inc
Price:  
38.81 
USD
Volume:  
139,924.00
United States | Auto Components
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SMP WACC - Weighted Average Cost of Capital

The WACC of Standard Motor Products Inc (SMP) is 7.9%.

The Cost of Equity of Standard Motor Products Inc (SMP) is 9.40%.
The Cost of Debt of Standard Motor Products Inc (SMP) is 7.50%.

Range Selected
Cost of equity 8.00% - 10.80% 9.40%
Tax rate 24.60% - 25.30% 24.95%
Cost of debt 5.10% - 9.90% 7.50%
WACC 6.3% - 9.5% 7.9%
WACC

SMP WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.9 1.07
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.00% 10.80%
Tax rate 24.60% 25.30%
Debt/Equity ratio 0.66 0.66
Cost of debt 5.10% 9.90%
After-tax WACC 6.3% 9.5%
Selected WACC 7.9%

SMP'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 SMP:

cost_of_equity (9.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.9) + 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.