VSTM
Verastem Inc
Price:  
7.17 
USD
Volume:  
2,621,003.00
United States | Biotechnology
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Verastem WACC - Weighted Average Cost of Capital

The WACC of Verastem Inc (VSTM) is 14.8%.

The Cost of Equity of Verastem Inc (VSTM) is 8.10%.
The Cost of Debt of Verastem Inc (VSTM) is 103.30%.

Range Selected
Cost of equity 6.70% - 9.50% 8.10%
Tax rate 26.20% - 27.00% 26.60%
Cost of debt 7.00% - 199.60% 103.30%
WACC 6.6% - 23.0% 14.8%
WACC

Verastem WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.62 0.82
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.70% 9.50%
Tax rate 26.20% 27.00%
Debt/Equity ratio 0.11 0.11
Cost of debt 7.00% 199.60%
After-tax WACC 6.6% 23.0%
Selected WACC 14.8%

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 (8.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.62) + 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.