The WACC of Travelcenters of America Inc (TA) is 7.3%.
Range | Selected | |
Cost of equity | 7.3% - 9.4% | 8.35% |
Tax rate | 23.5% - 26.1% | 24.8% |
Cost of debt | 5.1% - 8.3% | 6.7% |
WACC | 6.3% - 8.4% | 7.3% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.75 | 0.81 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.3% | 9.4% |
Tax rate | 23.5% | 26.1% |
Debt/Equity ratio | 0.44 | 0.44 |
Cost of debt | 5.1% | 8.3% |
After-tax WACC | 6.3% | 8.4% |
Selected WACC | 7.3% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
TA | Travelcenters of America Inc | 0.44 | 0.88 | 0.66 |
AAP | Advance Auto Parts Inc | 0.49 | 0.57 | 0.41 |
ABG | Asbury Automotive Group Inc | 1.12 | 1.03 | 0.56 |
ACQ.TO | AutoCanada Inc | 3.02 | 1.54 | 0.47 |
AN | AutoNation Inc | 0.62 | 0.92 | 0.62 |
CRMT | America's CAR-MART Inc | 1.67 | 1.19 | 0.52 |
CWH | Camping World Holdings Inc | 1.6 | 1.85 | 0.84 |
ONEW | OneWater Marine Inc | 3.82 | 1.65 | 0.42 |
PAG | Penske Automotive Group Inc | 0.54 | 0.66 | 0.47 |
SAH | Sonic Automotive Inc | 1.49 | 0.95 | 0.45 |
Low | High | |
Unlevered beta | 0.47 | 0.54 |
Relevered beta | 0.63 | 0.72 |
Adjusted relevered beta | 0.75 | 0.81 |
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 TA:
cost_of_equity (8.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.75) + 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.