The WACC of Innovate Corp (VATE) is 12.5%.
| Range | Selected | |
| Cost of equity | 27.90% - 36.30% | 32.10% |
| Tax rate | 10.60% - 13.80% | 12.20% |
| Cost of debt | 6.60% - 15.60% | 11.10% |
| WACC | 8.6% - 16.3% | 12.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 5.23 | 5.62 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 27.90% | 36.30% |
| Tax rate | 10.60% | 13.80% |
| Debt/Equity ratio | 7.04 | 7.04 |
| Cost of debt | 6.60% | 15.60% |
| After-tax WACC | 8.6% | 16.3% |
| Selected WACC | 12.5% | |
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 VATE:
cost_of_equity (32.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (5.23) + 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.