Walgreens WACC - Weighted Average Cost of Capital
The WACC of Walgreens Boots Alliance Inc (WBA) is 6.4%.
| Range | Selected | |
| Cost of equity | 7.6% - 11.3% | 9.45% |
| Tax rate | 23.6% - 33.8% | 28.7% |
| Cost of debt | 4.9% - 5.1% | 5% |
| WACC | 5.6% - 7.2% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.81 | 1.15 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.6% | 11.3% |
| Tax rate | 23.6% | 33.8% |
| Debt/Equity ratio | 1.09 | 1.09 |
| Cost of debt | 4.9% | 5.1% |
| After-tax WACC | 5.6% | 7.2% |
| Selected WACC | 6.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| WBA | Walgreens Boots Alliance Inc | 1.09 | 0.19 | 0.11 |
| ATD.B.TO | Alimentation Couche-Tard Inc | 0.23 | 0.92 | 0.8 |
| CJJD | China Jo-Jo Drugstores Inc | 5.17 | -0.3 | -0.07 |
| CLIQ.TO | Alcanna Inc | 0.72 | 1.55 | 1.05 |
| COST | Costco Wholesale Corp | 0.02 | 0.63 | 0.62 |
| CRRX.TO | CareRx Corp | 0.49 | 0.12 | 0.09 |
| NGVC | Natural Grocers By Vitamin Cottage Inc | 0.03 | 1.09 | 1.06 |
| RAD | Rite Aid Corp | 80.09 | 0.85 | 0.02 |
| SFM | Sprouts Farmers Market Inc | 0 | 0.75 | 0.75 |
| FAR.MI | Farmae SpA | 0.07 | 0.72 | 0.69 |
| Low | High | |
| Unlevered beta | 0.42 | 0.71 |
| Relevered beta | 0.72 | 1.22 |
| Adjusted relevered beta | 0.81 | 1.15 |
Walgreens'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 Walgreens:
cost_of_equity (9.45%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.81) + 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.