The WACC of Temecula Valley Bancorp Inc (TMCV) is 3.2%.
| Range | Selected | |
| Cost of equity | 6,407.90% - 26,252.40% | 16,330.15% |
| Tax rate | 40.70% - 41.10% | 40.90% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.1% - 3.4% | 3.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1392.19 | 4687.05 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6,407.90% | 26,252.40% |
| Tax rate | 40.70% | 41.10% |
| Debt/Equity ratio | 56673.31 | 56673.31 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.1% | 3.4% |
| Selected WACC | 3.2% | |
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 TMCV:
cost_of_equity (16,330.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1392.19) + 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.