2U WACC - Weighted Average Cost of Capital
The WACC of 2U Inc (TWOU) is 8.4%.
| Range | Selected | |
| Cost of equity | 418.5% - 3625.8% | 2022.15% |
| Tax rate | 0.6% - 0.6% | 0.6% |
| Cost of debt | 6.4% - 7.0% | 6.7% |
| WACC | 6.7% - 10.1% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 90.13 | 646.6 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 418.5% | 3625.8% |
| Tax rate | 0.6% | 0.6% |
| Debt/Equity ratio | 1164.3 | 1164.3 |
| Cost of debt | 6.4% | 7.0% |
| After-tax WACC | 6.7% | 10.1% |
| Selected WACC | 8.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| TWOU | 2U Inc | 1164.3 | 3.56 | 0 |
| ALTR | Altair Engineering Inc | 0.02 | 0.77 | 0.75 |
| CSOD | Cornerstone OnDemand Inc | 0.31 | 1.24 | 0.95 |
| EPAY | Bottomline Technologies (DE) Inc | 0.05 | 1.27 | 1.21 |
| GTYH | Gty Technology Holdings Inc | 0.07 | -0.41 | -0.39 |
| INVU | Investview Inc | 0.03 | -0.65 | -0.63 |
| LGIQ | Logiq Inc | 35.78 | 0.33 | 0.01 |
| LPSN | LivePerson Inc | 6.04 | 1.06 | 0.15 |
| OPT.TO | Optiva Inc | 12.03 | 0.81 | 0.06 |
| PD | PagerDuty Inc | 0.32 | 1.35 | 1.02 |
| VRNT | Verint Systems Inc | 0.37 | 1.6 | 1.17 |
| Low | High | |
| Unlevered beta | 0.06 | 0.75 |
| Relevered beta | 134.03 | 964.58 |
| Adjusted relevered beta | 90.13 | 646.6 |
2U's CAPM model and how its cost of Equity is calculated
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 2U:
cost_of_equity (2,022.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (90.13) + 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.