WACC of 5 Financial Companies

Bank of America Corporation: 5.78%

The Goldman Sachs Group: 3.79%

JPMorgan Chase & Co: 5.03%

Morgan Stanley: 4.84%

Wells Fargo & Company: 4.92%

The WACCs of the firms listed for the financial sector are relatively low because they are highly leveraged companies when compared to other sectors. This means they carry more debt than they do equity due to the fact that debt is cheaper to pay back because of lower rates and tax shielding.

WACC of 5 Technology Companies

Broadcom Limited: 9.83%

Intel Corporation: 9.44%

Maxim Integrated Products: 9.60%

NXP Semiconductors NV: 7.86%

Texas Instruments: 10.73%

Data for the 10 companies was collected on 10/26/16

The WACCs of the technology sector are in the 10% range since they finance their operations with less debt and more equity. This is because there are no fixed obligations with equity financing.

Analysis

The WACCs for the technology sector are higher than the WACCs for the financial sector because financial companies use more debt to finance their operations as technology companies tend to use more equity. For example, JPMorgan Chase & Co has a debt/equity ratio of 1.36 while Intel has a debt/equity ratio of 0.44. Also, even though technology companies have a higher WACC, they tend to offer higher returns than financial companies which compensates for the higher WACC.






Weighted Average Cost of Capital, Financial Companies vs. Technology Companies

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