WAL WACC - Weighted Average Cost of Capital
The WACC of Western Alliance Bancorp (WAL) is 8.1%.
| Range | Selected | |
| Cost of equity | 8.3% - 11.1% | 9.7% |
| Tax rate | 19.8% - 20.2% | 20% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.1% - 9.1% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.97 | 1.11 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.3% | 11.1% |
| Tax rate | 19.8% | 20.2% |
| Debt/Equity ratio | 0.39 | 0.39 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.1% | 9.1% |
| Selected WACC | 8.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| WAL | Western Alliance Bancorp | 0.39 | 1.44 | 1.1 |
| CBSH | Commerce Bancshares Inc | 0.35 | 0.83 | 0.65 |
| CFR | Cullen/Frost Bankers Inc | 0.55 | 1.12 | 0.77 |
| EWBC | East West Bancorp Inc | 0 | 1.19 | 1.19 |
| FCNCA | First Citizens BancShares Inc (Delaware) | 1.36 | 1.21 | 0.58 |
| FHN | First Horizon Corp (Tennessee) | 0.43 | 1.41 | 1.05 |
| PB | Prosperity Bancshares Inc | 0.51 | 0.7 | 0.5 |
| PNFP | Pinnacle Financial Partners Inc | 0.08 | 1.44 | 1.35 |
| SBNY | Signature Bank | 14.32 | 1.2 | 0.1 |
| UBSI | United Bankshares Inc | 0.09 | 0.83 | 0.77 |
| Low | High | |
| Unlevered beta | 0.72 | 0.88 |
| Relevered beta | 0.96 | 1.16 |
| Adjusted relevered beta | 0.97 | 1.11 |
WAL'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 WAL:
cost_of_equity (9.70%) = 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.