Verizon WACC - Weighted Average Cost of Capital
The WACC of Verizon Communications Inc (VZ) is 5.4%.
| Range | Selected | |
| Cost of equity | 6.0% - 7.8% | 6.9% |
| Tax rate | 23.1% - 23.3% | 23.2% |
| Cost of debt | 4.0% - 5.1% | 4.55% |
| WACC | 4.7% - 6.1% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.46 | 0.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.0% | 7.8% |
| Tax rate | 23.1% | 23.3% |
| Debt/Equity ratio | 0.78 | 0.78 |
| Cost of debt | 4.0% | 5.1% |
| After-tax WACC | 4.7% | 6.1% |
| Selected WACC | 5.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| VZ | Verizon Communications Inc | 0.78 | 0.27 | 0.17 |
| DTE.DE | Deutsche Telekom AG | 0.91 | 0.36 | 0.21 |
| TEF.MC | Telefonica SA | 1.77 | 0.65 | 0.28 |
| ALSK | Alaska Communications Systems Group Inc | 0.91 | 1.48 | 0.87 |
| BCE.TO | BCE Inc | 1.39 | -0.03 | -0.01 |
| CBB | Cincinnati Bell Inc | 2.5 | 0.36 | 0.12 |
| FTRCQ | Frontier Communications Corp | 226.23 | -0.08 | 0 |
| T | AT&T Inc | 0.62 | 0.18 | 0.12 |
| T.TO | Telus Corp | 0.88 | -0.06 | -0.04 |
| UPCO.CN | Upco International Inc | 0.05 | 1.17 | 1.13 |
| Low | High | |
| Unlevered beta | 0.12 | 0.19 |
| Relevered beta | 0.19 | 0.3 |
| Adjusted relevered beta | 0.46 | 0.53 |
Verizon'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 Verizon:
cost_of_equity (6.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.46) + 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.