The WACC of Vertiv Holdings Co (VRT) is 9.2%.
Range | Selected | |
Cost of equity | 8.30% - 11.00% | 9.65% |
Tax rate | 28.30% - 31.20% | 29.75% |
Cost of debt | 4.00% - 4.80% | 4.40% |
WACC | 7.9% - 10.4% | 9.2% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.97 | 1.09 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.30% | 11.00% |
Tax rate | 28.30% | 31.20% |
Debt/Equity ratio | 0.08 | 0.08 |
Cost of debt | 4.00% | 4.80% |
After-tax WACC | 7.9% | 10.4% |
Selected WACC | 9.2% | |
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 VRT:
cost_of_equity (9.65%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.97) + 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.