ZEN
Zendesk Inc
Price:  
77.48 
USD
Volume:  
3,636,660.00
United States | Software
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Zendesk WACC - Weighted Average Cost of Capital

The WACC of Zendesk Inc (ZEN) is 8.8%.

The Cost of Equity of Zendesk Inc (ZEN) is 9.00%.
The Cost of Debt of Zendesk Inc (ZEN) is 7.00%.

Range Selected
Cost of equity 7.70% - 10.30% 9.00%
Tax rate 2.20% - 2.90% 2.55%
Cost of debt 7.00% - 7.00% 7.00%
WACC 7.6% - 9.9% 8.8%
WACC

Zendesk WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.84 0.96
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.70% 10.30%
Tax rate 2.20% 2.90%
Debt/Equity ratio 0.13 0.13
Cost of debt 7.00% 7.00%
After-tax WACC 7.6% 9.9%
Selected WACC 8.8%

Zendesk'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 Zendesk:

cost_of_equity (9.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.84) + 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.