The WACC of ThermaFreeze Products Corp (TZPC) is 12.3%.
| Range | Selected | |
| Cost of equity | 25.10% - 32.30% | 28.70% |
| Tax rate | 33.50% - 33.80% | 33.65% |
| Cost of debt | 7.90% - 23.90% | 15.90% |
| WACC | 7.1% - 17.4% | 12.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 4.61 | 4.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 25.10% | 32.30% |
| Tax rate | 33.50% | 33.80% |
| Debt/Equity ratio | 9.52 | 9.52 |
| Cost of debt | 7.90% | 23.90% |
| After-tax WACC | 7.1% | 17.4% |
| Selected WACC | 12.3% | |
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 TZPC:
cost_of_equity (28.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (4.61) + 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.