The WACC of Waddell & Reed Financial Inc (WDR) is 8.0%.
Range | Selected | |
Cost of equity | 6.9% - 9.7% | 8.3% |
Tax rate | 28.0% - 31.2% | 29.6% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.7% - 9.3% | 8.0% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 4.2% | 5.2% |
Adjusted beta | 0.88 | 1.05 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.9% | 9.7% |
Tax rate | 28.0% | 31.2% |
Debt/Equity ratio | 0.06 | 0.06 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.7% | 9.3% |
Selected WACC | 8.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
WDR | Waddell & Reed Financial Inc | 0.06 | 1.4 | 1.34 |
BSIG | Brightsphere Investment Group Inc | 0.28 | 1.11 | 0.93 |
FHI | Federated Hermes Inc | 0.1 | 0.61 | 0.57 |
FOCS | Focus Financial Partners Inc | 0.72 | 1.57 | 1.04 |
FSK | FS KKR Capital Corp | 1.27 | 0.58 | 0.31 |
FSZ.TO | Fiera Capital Corp | 1.32 | 1.2 | 0.62 |
GBDC | Golub Capital BDC Inc | 1.2 | 0.58 | 0.32 |
PSEC | Prospect Capital Corp | 1.7 | 0.47 | 0.22 |
SCU | Sculptor Capital Management Inc | 1.53 | 0.82 | 0.4 |
VRTS | Virtus Investment Partners Inc | 1.9 | 1.05 | 0.45 |
Low | High | |
Unlevered beta | 0.43 | 0.59 |
Relevered beta | 0.82 | 1.07 |
Adjusted relevered beta | 0.88 | 1.05 |
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 WDR:
cost_of_equity (8.30%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.88) + 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.