The WACC of Willis Towers Watson PLC (WTW) is 7.3%.
Range | Selected | |
Cost of equity | 6.7% - 9.1% | 7.9% |
Tax rate | 17.9% - 19.1% | 18.5% |
Cost of debt | 4.4% - 4.8% | 4.6% |
WACC | 6.2% - 8.3% | 7.3% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.62 | 0.75 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.7% | 9.1% |
Tax rate | 17.9% | 19.1% |
Debt/Equity ratio | 0.17 | 0.17 |
Cost of debt | 4.4% | 4.8% |
After-tax WACC | 6.2% | 8.3% |
Selected WACC | 7.3% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
WTW | Willis Towers Watson PLC | 0.17 | 0.39 | 0.34 |
BLL | Ball Corp | 0.35 | 0.51 | 0.4 |
COP | ConocoPhillips | 0.2 | 0.73 | 0.63 |
CTRA | Contura Energy Inc | 0.18 | 0.68 | 0.59 |
EPAM | Epam Systems Inc | 0 | 1.3 | 1.3 |
ETN | Eaton Corporation PLC | 0.06 | 1.5 | 1.42 |
L | Loews Corp | 0.47 | 0.51 | 0.37 |
MKC | McCormick & Company Inc | 0.23 | 0.23 | 0.19 |
PCG | PG&E Corp | 1.96 | 0.28 | 0.11 |
Low | High | |
Unlevered beta | 0.37 | 0.55 |
Relevered beta | 0.43 | 0.63 |
Adjusted relevered beta | 0.62 | 0.75 |
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 WTW:
cost_of_equity (7.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.62) + 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.