SMPL WACC - Weighted Average Cost of Capital

The WACC of Simply Good Foods Co (SMPL) is 6.5%.

The Cost of Equity of Simply Good Foods Co (SMPL) is 6.80%.

The Cost of Debt of Simply Good Foods Co (SMPL) is 5.45%.

	Range	Selected
Cost of equity	5.90% - 7.70%	6.80%
Tax rate	24.70% - 26.20%	25.45%
Cost of debt	4.80% - 6.10%	5.45%
WACC	5.7% - 7.4%	6.5%

WACC

SMPL WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.44	0.51

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.90%	7.70%

Tax rate	24.70%	26.20%
Debt/Equity ratio	0.11	0.11
Cost of debt	4.80%	6.10%

After-tax WACC	5.7%	7.4%


Selected WACC	6.5%

SMPL'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 SMPL:

cost_of_equity (6.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.44) + 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.