The WACC of American Energy Partners Inc (AEPT) is 8.4%.
Range | Selected | |
Cost of equity | 5.1% - 21.1% | 13.1% |
Tax rate | 26.2% - 27.0% | 26.6% |
Cost of debt | 7.0% - 15.8% | 11.4% |
WACC | 5.2% - 11.7% | 8.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | -3.32 | -0.05 |
Additional risk adjustments | 16.5% | 17.0% |
Cost of equity | 5.1% | 21.1% |
Tax rate | 26.2% | 27.0% |
Debt/Equity ratio | 65.84 | 65.84 |
Cost of debt | 7.0% | 15.8% |
After-tax WACC | 5.2% | 11.7% |
Selected WACC | 8.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
AEPT | American Energy Partners Inc | 65.84 | 1.12 | 0.02 |
ADMG | Adamant DRI Processing and Minerals Group | 0 | -0.38 | -0.38 |
ARVY | Alliance Recovery Corp | 0.19 | -0.38 | -0.33 |
AWWI | Alpha Wastewater Inc | 74.81 | -1.08 | -0.02 |
GTOO.CN | G2 Technologies Corp | 7.81 | -0.34 | -0.05 |
IPRC | Imperial Resources Inc | 144.85 | 1.03 | 0.01 |
RGBP | Regen BioPharma Inc | 0.43 | -1.63 | -1.24 |
SNPW | Sun Pacific Holding Corp | 2.23 | -0.53 | -0.2 |
Low | High | |
Unlevered beta | -0.23 | -0.04 |
Relevered beta | -5.45 | -0.57 |
Adjusted relevered beta | -3.32 | -0.05 |
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 AEPT:
cost_of_equity (13.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-3.32) + risk_adjustments (16.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.