VSTM
Verastem Inc
Price:  
4.8 
USD
Volume:  
1,675,023
United States | Biotechnology

Verastem WACC - Weighted Average Cost of Capital

The WACC of Verastem Inc (VSTM) is 17.2%.

The Cost of Equity of Verastem Inc (VSTM) is 8.2%.
The Cost of Debt of Verastem Inc (VSTM) is 103.3%.

RangeSelected
Cost of equity6.9% - 9.5%8.2%
Tax rate26.2% - 27.0%26.6%
Cost of debt7.0% - 199.6%103.3%
WACC6.7% - 27.7%17.2%
WACC

Verastem WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.670.83
Additional risk adjustments0.0%0.5%
Cost of equity6.9%9.5%
Tax rate26.2%27.0%
Debt/Equity ratio
0.150.15
Cost of debt7.0%199.6%
After-tax WACC6.7%27.7%
Selected WACC17.2%

Verastem'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 Verastem:

cost_of_equity (8.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.67) + 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.