The WACC of Tenneco Inc (TEN) is 6.4%.
Range | Selected | |
Cost of equity | 20.7% - 29.4% | 25.05% |
Tax rate | 26.2% - 27.0% | 26.6% |
Cost of debt | 4.0% - 7.5% | 5.75% |
WACC | 4.8% - 8.0% | 6.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 3.66 | 4.39 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 20.7% | 29.4% |
Tax rate | 26.2% | 27.0% |
Debt/Equity ratio | 8.52 | 8.52 |
Cost of debt | 4.0% | 7.5% |
After-tax WACC | 4.8% | 8.0% |
Selected WACC | 6.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
TEN | Tenneco Inc | 2.62 | 1.08 | 0.37 |
ADNT | Adient PLC | 1.45 | 0.89 | 0.43 |
ALV | Autoliv Inc | 0.22 | 0.92 | 0.79 |
BWA | Borgwarner Inc | 0.56 | 0.76 | 0.54 |
DAN | Dana Inc | 1.05 | 1.52 | 0.86 |
FOXF | Fox Factory Holding Corp | 0.65 | 1.23 | 0.83 |
LEA | Lear Corp | 0.55 | 0.63 | 0.45 |
MPAA | Motorcar Parts of America Inc | 0.65 | 1.45 | 0.98 |
PATK | Patrick Industries Inc | 0.43 | 1.11 | 0.85 |
STRT | Strattec Security Corp | 0.05 | 1.51 | 1.46 |
Low | High | |
Unlevered beta | 0.69 | 0.84 |
Relevered beta | 4.97 | 6.06 |
Adjusted relevered beta | 3.66 | 4.39 |
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 TEN:
cost_of_equity (25.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (3.66) + 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.