How to calculate WACC for brocade communications?

As you suggested I am calculating WACC using below formula for brocade:

WACC = Rf + Beta ( Rm-Rf)

what value I should use for Rm for brocade share? Can i use ROE of the brocade industry?

1 Answer(s)


The equity market risk premium (Rm-Rf) represents the returns investors expect to compensate them for taking extra risk by investing in the stock market over and above the risk-free rate. In other words, it is the difference between the risk-free rate and the market rate. It is a highly contentious figure.

The frequently used number is based on the historical average return obtained from investing in the stock market. In this scenario, the stock market returns for the Brocade industry - networking and communications make sense to use.