The WACC of Standard AVB Financial Corp (STND) is 7.0%.
Range | Selected | |
Cost of equity | 6.2% - 8.1% | 7.15% |
Tax rate | 20.7% - 23.9% | 22.3% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.1% - 7.9% | 7.0% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 4.2% | 5.2% |
Adjusted beta | 0.72 | 0.75 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.2% | 8.1% |
Tax rate | 20.7% | 23.9% |
Debt/Equity ratio | 0.04 | 0.04 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.1% | 7.9% |
Selected WACC | 7.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
STND | Standard AVB Financial Corp | 0.04 | 0.22 | 0.22 |
CFBK | CF Bankshares Inc | 0.32 | 1.16 | 0.93 |
ESBK | Elmira Savings Bank | 0.35 | 0.93 | 0.73 |
GCBC | Greene County Bancorp Inc | 0.13 | 0.93 | 0.84 |
GFED | Guaranty Federal Bancshares Inc | 0.22 | 0.6 | 0.51 |
HFBL | Home Federal Bancorp Inc of Louisiana | 0.18 | 0.02 | 0.01 |
IROQ | IF Bancorp Inc | 0.51 | -0.03 | -0.02 |
NECB | Northeast Community Bancorp Inc | 0 | 0.87 | 0.86 |
RVSB | Riverview Bancorp Inc | 0.25 | 0.18 | 0.15 |
SVBI | Severn Bancorp Inc | 0.12 | 0.79 | 0.73 |
Low | High | |
Unlevered beta | 0.39 | 0.73 |
Relevered beta | 0.58 | 0.63 |
Adjusted relevered beta | 0.72 | 0.75 |
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 STND:
cost_of_equity (7.15%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.72) + 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.