ZVO WACC - Weighted Average Cost of Capital
The WACC of Zovio Inc (ZVO) is 6.9%.
| Range | Selected | |
| Cost of equity | 5.9% - 7.9% | 6.9% |
| Tax rate | 1.2% - 5.3% | 3.25% |
| Cost of debt | 7.0% - 7.0% | 7% |
| WACC | 6.2% - 7.5% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.34 | 0.45 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.9% | 7.9% |
| Tax rate | 1.2% | 5.3% |
| Debt/Equity ratio | 0.45 | 0.45 |
| Cost of debt | 7.0% | 7.0% |
| After-tax WACC | 6.2% | 7.5% |
| Selected WACC | 6.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ZVO | Zovio Inc | 0.45 | 1.27 | 0.88 |
| AMBO | Ambow Education Holding Ltd | 0.05 | 0.86 | 0.82 |
| APEI | American Public Education Inc | 0.16 | 0.77 | 0.66 |
| BEDU | Bright Scholar Education Holdings Ltd | 1 | -0.27 | -0.14 |
| EVCI | EVCI Career Colleges Holding Corp | 25.8 | 0.49 | 0.02 |
| MBA.TO | CIBT Education Group Inc | 11.24 | 1.19 | 0.1 |
| ONE | OneSmart International Education Group Ltd | 34.06 | 0.09 | 0 |
| TEDU | Tarena International Inc | 0.58 | -0.28 | -0.18 |
| TIGE | Tigrent Inc | 619.02 | -0.03 | 0 |
| UTI | Universal Technical Institute Inc | 0.07 | 0.92 | 0.86 |
| Low | High | |
| Unlevered beta | 0.01 | 0.32 |
| Relevered beta | 0.01 | 0.18 |
| Adjusted relevered beta | 0.34 | 0.45 |
ZVO'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 ZVO:
cost_of_equity (6.90%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.34) + 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.