The WACC of Wendys Co (WEN) is 6.4%.
Range | Selected | |
Cost of equity | 7.5% - 11.6% | 9.55% |
Tax rate | 25.3% - 27.0% | 26.15% |
Cost of debt | 4.6% - 7.0% | 5.8% |
WACC | 5.0% - 7.7% | 6.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.79 | 1.2 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.5% | 11.6% |
Tax rate | 25.3% | 27.0% |
Debt/Equity ratio | 1.5 | 1.5 |
Cost of debt | 4.6% | 7.0% |
After-tax WACC | 5.0% | 7.7% |
Selected WACC | 6.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
WEN | Wendys Co | 1.5 | 0.35 | 0.17 |
ARCO | Arcos Dorados Holdings Inc | 0.48 | 0.22 | 0.17 |
CAKE | Cheesecake Factory Inc | 0.15 | 0.83 | 0.75 |
CBRL | Cracker Barrel Old Country Store Inc | 0.35 | 0.87 | 0.69 |
JACK | Jack in the Box Inc | 5.46 | 0.81 | 0.16 |
PLAY | Dave & Buster's Entertainment Inc | 1.41 | 0.87 | 0.43 |
PZZA | Papa John's International Inc | 0.48 | 0.92 | 0.68 |
SHAK | Shake Shack Inc | 0.04 | 1.19 | 1.15 |
TAST | Carrols Restaurant Group Inc | 0.82 | -0.04 | -0.03 |
TXRH | Texas Roadhouse Inc | 0 | 0.57 | 0.57 |
Low | High | |
Unlevered beta | 0.32 | 0.62 |
Relevered beta | 0.69 | 1.3 |
Adjusted relevered beta | 0.79 | 1.2 |
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 Wendys:
cost_of_equity (9.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.79) + 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.