AES WACC - Weighted Average Cost of Capital
The WACC of AES Corp (AES) is 6.0%.
| Range | Selected | |
| Cost of equity | 7.1% - 11.1% | 9.1% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 4.8% - 9.1% | 6.95% |
| WACC | 4.4% - 7.6% | 6.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.7 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.1% | 11.1% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 3.54 | 3.54 |
| Cost of debt | 4.8% | 9.1% |
| After-tax WACC | 4.4% | 7.6% |
| Selected WACC | 6.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| AES | AES Corp | 3.54 | 0.88 | 0.25 |
| AEEI | American Environmental Energy Inc | 1.21 | 0.25 | 0.13 |
| AT | Atlantic Power Corp | 2.08 | 0.14 | 0.05 |
| CPX.TO | Capital Power Corp | 0.61 | 1.16 | 0.8 |
| EUSP | EuroSite Power Inc | 0.2 | -0.72 | -0.63 |
| KEN | Kenon Holdings Ltd | 0.56 | 0.89 | 0.63 |
| MXG.TO | Maxim Power Corp | 0 | 1.57 | 1.57 |
| NPI.TO | Northland Power Inc | 1.25 | 0.87 | 0.45 |
| SXI.TO | Synex International Inc | 1.15 | -0.12 | -0.07 |
| TA.TO | TransAlta Corp | 1.06 | 0.4 | 0.22 |
| Low | High | |
| Unlevered beta | 0.19 | 0.33 |
| Relevered beta | 0.55 | 1.18 |
| Adjusted relevered beta | 0.7 | 1.12 |
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 (9.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.7) + 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.