ULCC
Frontier Group Holdings Inc
Price:  
3.36 
USD
Volume:  
6,899,260.00
United States | Airlines
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ULCC WACC - Weighted Average Cost of Capital

The WACC of Frontier Group Holdings Inc (ULCC) is 7.3%.

The Cost of Equity of Frontier Group Holdings Inc (ULCC) is 9.15%.
The Cost of Debt of Frontier Group Holdings Inc (ULCC) is 6.55%.

Range Selected
Cost of equity 7.50% - 10.80% 9.15%
Tax rate 24.60% - 33.30% 28.95%
Cost of debt 4.00% - 9.10% 6.55%
WACC 5.7% - 8.9% 7.3%
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 0.79 1.06
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.50% 10.80%
Tax rate 24.60% 33.30%
Debt/Equity ratio 0.66 0.66
Cost of debt 4.00% 9.10%
After-tax WACC 5.7% 8.9%
Selected WACC 7.3%

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 (9.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.79) + 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.