SPPI WACC - Weighted Average Cost of Capital
The WACC of Spectrum Pharmaceuticals Inc (SPPI) is 7.1%.
| Range | Selected | |
| Cost of equity | 6.3% - 7.9% | 7.1% |
| Tax rate | 0.1% - 0.6% | 0.35% |
| Cost of debt | 7.0% - 7.0% | 7% |
| WACC | 6.4% - 7.8% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.52 | 0.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.3% | 7.9% |
| Tax rate | 0.1% | 0.6% |
| Debt/Equity ratio | 0.14 | 0.14 |
| Cost of debt | 7.0% | 7.0% |
| After-tax WACC | 6.4% | 7.8% |
| Selected WACC | 7.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SPPI | Spectrum Pharmaceuticals Inc | 0.14 | 3.25 | 2.86 |
| ABBV | Abbvie Inc | 0.21 | 0.35 | 0.29 |
| AMGN | Amgen Inc | 0.42 | 0.35 | 0.25 |
| AQB | AquaBounty Technologies Inc | 1.28 | 0.41 | 0.18 |
| CTIC | CTI Biopharma Corp | 0.09 | 0.08 | 0.07 |
| GILD | Gilead Sciences Inc | 0.22 | 0.32 | 0.26 |
| IMAB | I-Mab | 0.06 | 1.42 | 1.34 |
| OTLK | Outlook Therapeutics Inc | 0.71 | 0.44 | 0.26 |
| RCEL | AVITA Medical Inc | 0.23 | 1.82 | 1.49 |
| TNXP | Tonix Pharmaceuticals Holding Corp | 0.05 | 0.5 | 0.48 |
| TTOO | T2 Biosystems Inc | 10.98 | -1.41 | -0.12 |
| Low | High | |
| Unlevered beta | 0.26 | 0.29 |
| Relevered beta | 0.28 | 0.31 |
| Adjusted relevered beta | 0.52 | 0.54 |
SPPI'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 SPPI:
cost_of_equity (7.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.52) + 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.