ULCC
Frontier Group Holdings Inc
Price:  
3.67 
USD
Volume:  
1,858,422.00
United States | Airlines
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ULCC WACC - Weighted Average Cost of Capital

The WACC of Frontier Group Holdings Inc (ULCC) is 7.8%.

The Cost of Equity of Frontier Group Holdings Inc (ULCC) is 9.10%.
The Cost of Debt of Frontier Group Holdings Inc (ULCC) is 8.20%.

Range Selected
Cost of equity 7.60% - 10.60% 9.10%
Tax rate 24.60% - 33.30% 28.95%
Cost of debt 4.00% - 12.40% 8.20%
WACC 5.9% - 9.7% 7.8%
WACC

ULCC WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.8 1.02
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.60% 10.60%
Tax rate 24.60% 33.30%
Debt/Equity ratio 0.6 0.6
Cost of debt 4.00% 12.40%
After-tax WACC 5.9% 9.7%
Selected WACC 7.8%

ULCC'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 ULCC:

cost_of_equity (9.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.8) + 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.