The WACC of Targeted Medical Pharma Inc (TRGM) is 4.7%.
| Range | Selected | |
| Cost of equity | 4.70% - 6,187.80% | 3,096.25% |
| Tax rate | 15.70% - 29.80% | 22.75% |
| Cost of debt | 5.30% - 7.00% | 6.15% |
| WACC | 4.5% - 4.9% | 4.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -1340.26 | 3.03 |
| Additional risk adjustments | 6166.0% | 6166.5% |
| Cost of equity | 4.70% | 6,187.80% |
| Tax rate | 15.70% | 29.80% |
| Debt/Equity ratio | 176489.67 | 176489.67 |
| Cost of debt | 5.30% | 7.00% |
| After-tax WACC | 4.5% | 4.9% |
| Selected WACC | 4.7% | |
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 TRGM:
cost_of_equity (3,096.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-1340.26) + risk_adjustments (6,166.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.