The WACC of Timberland Bancorp Inc (TSBK) is 6.9%.
Range | Selected | |
Cost of equity | 8.2% - 11.6% | 9.9% |
Tax rate | 20.1% - 20.1% | 20.1% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.1% - 7.8% | 6.9% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.94 | 1.2 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.2% | 11.6% |
Tax rate | 20.1% | 20.1% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.1% | 7.8% |
Selected WACC | 6.9% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
TSBK | Timberland Bancorp Inc | 0.9 | 0.75 | 0.44 |
CFBK | CF Bankshares Inc | 0.32 | 1.13 | 0.91 |
ESSA | ESSA Bancorp Inc | 1.33 | 0.84 | 0.41 |
GCBC | Greene County Bancorp Inc | 0.12 | 0.95 | 0.87 |
NECB | Northeast Community Bancorp Inc | 0 | 0.87 | 0.87 |
PBFS | Pioneer Bancorp Inc | 0 | 0.43 | 0.43 |
PCSB | PCSB Financial Corp | 0.04 | 0.58 | 0.56 |
RVSB | Riverview Bancorp Inc | 0.24 | 0.2 | 0.17 |
STND | Standard AVB Financial Corp | 0.04 | 0.22 | 0.22 |
SVBI | Severn Bancorp Inc | 0.12 | 0.79 | 0.73 |
WNEB | Western New England Bancorp Inc | 0.1 | 0.77 | 0.72 |
Low | High | |
Unlevered beta | 0.44 | 0.72 |
Relevered beta | 0.91 | 1.3 |
Adjusted relevered beta | 0.94 | 1.2 |
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 TSBK:
cost_of_equity (9.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.94) + 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.