Synopsys WACC - Weighted Average Cost of Capital
The WACC of Synopsys Inc (SNPS) is 8.1%.
| Range | Selected | |
| Cost of equity | 6.6% - 9.6% | 8.1% |
| Tax rate | 6.4% - 7.4% | 6.9% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 6.6% - 9.6% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.59 | 0.85 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.6% | 9.6% |
| Tax rate | 6.4% | 7.4% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 6.6% | 9.6% |
| Selected WACC | 8.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SNPS | Synopsys Inc | 0 | 1.6 | 1.59 |
| ACIW | ACI Worldwide Inc | 0.18 | 0.95 | 0.81 |
| ALTR | Altair Engineering Inc | 0.02 | 0.77 | 0.75 |
| CTK | CooTek (Cayman) Inc | 2.94 | 0.48 | 0.13 |
| FICO | Fair Isaac Corp | 0.04 | 1.16 | 1.11 |
| GTYH | Gty Technology Holdings Inc | 0.07 | -0.41 | -0.39 |
| INVU | Investview Inc | 0.02 | -0.64 | -0.62 |
| LPSN | LivePerson Inc | 7.14 | 1.21 | 0.16 |
| TYL | Tyler Technologies Inc | 0.02 | 0.54 | 0.53 |
| WDAY | Workday Inc | 0.04 | 1.02 | 0.98 |
| Low | High | |
| Unlevered beta | 0.38 | 0.78 |
| Relevered beta | 0.39 | 0.78 |
| Adjusted relevered beta | 0.59 | 0.85 |
Synopsys'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 Synopsys:
cost_of_equity (8.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.59) + 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.