The WACC of TranSwitch Corp (TXCCQ) is 6.8%.
| Range | Selected | |
| Cost of equity | 5.10% - 1,224.10% | 614.60% |
| Tax rate | 2.90% - 3.10% | 3.00% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 6.8% - 6.8% | 6.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -38.97 | 185.49 |
| Additional risk adjustments | 180.5% | 181.0% |
| Cost of equity | 5.10% | 1,224.10% |
| Tax rate | 2.90% | 3.10% |
| Debt/Equity ratio | 52139.05 | 52139.05 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 6.8% | 6.8% |
| Selected WACC | 6.8% | |
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 TXCCQ:
cost_of_equity (614.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-38.97) + risk_adjustments (180.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.