The WACC of Schweitzer-Mauduit International Inc (SWM) is 7.2%.
Range | Selected | |
Cost of equity | 7.9% - 12.2% | 10.05% |
Tax rate | 17.3% - 18.3% | 17.8% |
Cost of debt | 5.5% - 8.0% | 6.75% |
WACC | 5.8% - 8.6% | 7.2% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 4.2% | 5.2% |
Adjusted beta | 1.11 | 1.53 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.9% | 12.2% |
Tax rate | 17.3% | 18.3% |
Debt/Equity ratio | 1.7 | 1.7 |
Cost of debt | 5.5% | 8.0% |
After-tax WACC | 5.8% | 8.6% |
Selected WACC | 7.2% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
SWM | Schweitzer-Mauduit International Inc | 1.7 | 1.03 | 0.43 |
CFX.TO | Canfor Pulp Products Inc | 2.22 | 0.35 | 0.12 |
CLW | Clearwater Paper Corp | 0.62 | 0.49 | 0.32 |
GLT | Glatfelter Corp | 1.16 | 1.55 | 0.79 |
ITP | IT Tech Packaging Inc | 2.76 | -0.72 | -0.22 |
MERC | Mercer International Inc | 6.32 | 1.17 | 0.19 |
NP | Neenah Inc | 0.86 | 1.49 | 0.88 |
SXP.TO | Supremex Inc | 0.94 | 1.06 | 0.6 |
VRS | Verso Corp | 0.01 | 1.89 | 1.88 |
ZCOM | Impreso Inc | 0.48 | 3.55 | 2.55 |
Low | High | |
Unlevered beta | 0.39 | 0.67 |
Relevered beta | 1.16 | 1.79 |
Adjusted relevered beta | 1.11 | 1.53 |
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 SWM:
cost_of_equity (10.05%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.11) + 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.