AES WACC - Weighted Average Cost of Capital

The WACC of AES Corp (AES) is 6.1%.

The Cost of Equity of AES Corp (AES) is 9.50%.

The Cost of Debt of AES Corp (AES) is 6.95%.

	Range	Selected
Cost of equity	6.70% - 12.30%	9.50%
Tax rate	26.20% - 27.00%	26.60%
Cost of debt	4.80% - 9.10%	6.95%
WACC	4.3% - 8.0%	6.1%

WACC

AES WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.61	1.33

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.70%	12.30%

Tax rate	26.20%	27.00%
Debt/Equity ratio	3.34	3.34
Cost of debt	4.80%	9.10%

After-tax WACC	4.3%	8.0%


Selected WACC	6.1%

AES'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 AES:

cost_of_equity (9.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.61) + 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.