ZM
Zoom Video Communications Inc
Price:  
81.42 
USD
Volume:  
3,180,110.00
United States | Software
Valuation
Overview
Financials
Forecast
Compare
Historical Price
SolvencyDividends
Transactions
People

Zoom WACC - Weighted Average Cost of Capital

The WACC of Zoom Video Communications Inc (ZM) is 7.9%.

The Cost of Equity of Zoom Video Communications Inc (ZM) is 11.95%.
The Cost of Debt of Zoom Video Communications Inc (ZM) is 5.00%.

Range Selected
Cost of equity 10.40% - 13.50% 11.95%
Tax rate 23.30% - 24.00% 23.65%
Cost of debt 5.00% - 5.00% 5.00%
WACC 7.1% - 8.7% 7.9%
WACC

Zoom WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.42 1.55
Additional risk adjustments 0.0% 0.5%
Cost of equity 10.40% 13.50%
Tax rate 23.30% 24.00%
Debt/Equity ratio 1 1
Cost of debt 5.00% 5.00%
After-tax WACC 7.1% 8.7%
Selected WACC 7.9%

Zoom'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 Zoom:

cost_of_equity (11.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.42) + 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.