SNBR WACC - Weighted Average Cost of Capital

The WACC of Sleep Number Corp (SNBR) is 13.0%.

The Cost of Equity of Sleep Number Corp (SNBR) is 21.25%.

The Cost of Debt of Sleep Number Corp (SNBR) is 14.95%.

	Range	Selected
Cost of equity	15.90% - 26.60%	21.25%
Tax rate	20.60% - 21.60%	21.10%
Cost of debt	6.00% - 23.90%	14.95%
WACC	6.3% - 19.8%	13.0%

WACC

SNBR WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	2.61	3.89

Additional risk adjustments	0.0%	0.5%
Cost of equity	15.90%	26.60%

Tax rate	20.60%	21.60%
Debt/Equity ratio	6.28	6.28
Cost of debt	6.00%	23.90%

After-tax WACC	6.3%	19.8%


Selected WACC	13.0%

SNBR'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 SNBR:

cost_of_equity (21.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (2.61) + 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.