The WACC of Saudi Arabian Oil Co (2222.SR) is 9.1%.
| Range | Selected | |
| Cost of equity | 8.40% - 10.40% | 9.40% |
| Tax rate | 48.30% - 48.90% | 48.60% |
| Cost of debt | 4.00% - 6.50% | 5.25% |
| WACC | 8.1% - 10.0% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 5.9% | 6.4% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.41 | 0.49 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.40% | 10.40% |
| Tax rate | 48.30% | 48.90% |
| Debt/Equity ratio | 0.05 | 0.05 |
| Cost of debt | 4.00% | 6.50% |
| After-tax WACC | 8.1% | 10.0% |
| Selected WACC | 9.1% | |
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 2222.SR:
cost_of_equity (9.40%) = risk_free_rate (6.15%) + equity_risk_premium (6.60%) * adjusted_beta (0.41) + 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.