The WACC of Technical Communications Corp (TCCO) is 5.4%.
| Range | Selected | |
| Cost of equity | 5.30% - 9,473.50% | 4,739.40% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 5.2% - 5.7% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -303.49 | 1441.27 |
| Additional risk adjustments | 1397.5% | 1398.0% |
| Cost of equity | 5.30% | 9,473.50% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 17027.03 | 17027.03 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 5.2% | 5.7% |
| Selected WACC | 5.4% | |
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 TCCO:
cost_of_equity (4,739.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-303.49) + risk_adjustments (1,397.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.