SMSI WACC - Weighted Average Cost of Capital
The WACC of Smith Micro Software Inc (SMSI) is 6.9%.
| Range | Selected | |
| Cost of equity | 5.9% - 11.5% | 8.7% |
| Tax rate | 0.7% - 0.7% | 0.7% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.5% - 8.3% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.45 | 1.19 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.9% | 11.5% |
| Tax rate | 0.7% | 0.7% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.5% | 8.3% |
| Selected WACC | 6.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SMSI | Smith Micro Software Inc | 0.81 | 1.39 | 0.77 |
| INUV | Inuvo Inc | 0 | 1.28 | 1.28 |
| LCHD | Leader Capital Holdings Corp | 0.23 | -0.55 | -0.44 |
| PCYG | Park City Group Inc | 0 | 0.15 | 0.15 |
| PERK.CN | Perk Labs Inc | 0.03 | -0.4 | -0.39 |
| PKK.CN | Peak Fintech Group Inc | 1.91 | 1.91 | 0.66 |
| RWWI | Rand Worldwide Inc | 0.01 | 0.64 | 0.64 |
| SHSP | SharpSpring Inc | 0.02 | 1.84 | 1.79 |
| SSTI | Shotspotter Inc | 0.02 | 1.11 | 1.09 |
| TEUM | Pareteum Corp | 206.35 | 0.8 | 0 |
| VSBY.CN | VSBLTY Groupe Technologies Corp | 0.18 | -0.64 | -0.55 |
| Low | High | |
| Unlevered beta | 0.15 | 0.66 |
| Relevered beta | 0.18 | 1.28 |
| Adjusted relevered beta | 0.45 | 1.19 |
SMSI'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 SMSI:
cost_of_equity (8.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.45) + 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.