The WACC of Sonic Foundry Inc (SOFO) is 17.6%.
| Range | Selected | |
| Cost of equity | 1,409.50% - 546,709.10% | 274,059.30% |
| Tax rate | 2.00% - 2.80% | 2.40% |
| Cost of debt | 7.00% - 28.70% | 17.85% |
| WACC | 6.9% - 28.4% | 17.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 305.58 | 97625.76 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 1,409.50% | 546,709.10% |
| Tax rate | 2.00% | 2.80% |
| Debt/Equity ratio | 918826.3 | 918826.3 |
| Cost of debt | 7.00% | 28.70% |
| After-tax WACC | 6.9% | 28.4% |
| Selected WACC | 17.6% | |
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 SOFO:
cost_of_equity (274,059.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (305.58) + 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.