The WACC of Textron Inc (TXT) is 7.7%.
Range | Selected | |
Cost of equity | 7.3% - 9.9% | 8.6% |
Tax rate | 14.9% - 15.2% | 15.05% |
Cost of debt | 4.0% - 4.8% | 4.4% |
WACC | 6.6% - 8.8% | 7.7% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.75 | 0.9 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.3% | 9.9% |
Tax rate | 14.9% | 15.2% |
Debt/Equity ratio | 0.23 | 0.23 |
Cost of debt | 4.0% | 4.8% |
After-tax WACC | 6.6% | 8.8% |
Selected WACC | 7.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
TXT | Textron Inc | 0.23 | 1.24 | 1.04 |
AJRD | Aerojet Rocketdyne Holdings Inc | 0.06 | 0.54 | 0.51 |
BBD.B.TO | Bombardier Inc | 0.48 | 1.93 | 1.38 |
HII | Huntington Ingalls Industries Inc | 0.32 | 0.85 | 0.67 |
HRX.TO | Heroux Devtek Inc | 0.2 | 0.21 | 0.18 |
HWM | Howmet Aerospace Inc | 0.05 | 1.45 | 1.39 |
LHX | L3harris Technologies Inc | 0.25 | 0.51 | 0.42 |
SPR | Spirit AeroSystems Holdings Inc | 0.94 | 0.95 | 0.53 |
TDG | TransDigm Group Inc | 0.29 | 0.94 | 0.75 |
TGI | Triumph Group Inc | 0.49 | 0.5 | 0.36 |
Low | High | |
Unlevered beta | 0.52 | 0.7 |
Relevered beta | 0.63 | 0.85 |
Adjusted relevered beta | 0.75 | 0.9 |
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 Textron:
cost_of_equity (8.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.75) + 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.