AROC
Archrock Inc
Price:  
23.92 
USD
Volume:  
1,827,013.00
United States | Energy Equipment & Services
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Archrock WACC - Weighted Average Cost of Capital

The WACC of Archrock Inc (AROC) is 9.1%.

The Cost of Equity of Archrock Inc (AROC) is 11.30%.
The Cost of Debt of Archrock Inc (AROC) is 6.40%.

Range Selected
Cost of equity 9.70% - 12.90% 11.30%
Tax rate 26.10% - 26.50% 26.30%
Cost of debt 6.10% - 6.70% 6.40%
WACC 7.9% - 10.2% 9.1%
WACC

Archrock WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.26 1.43
Additional risk adjustments 0.0% 0.5%
Cost of equity 9.70% 12.90%
Tax rate 26.10% 26.50%
Debt/Equity ratio 0.51 0.51
Cost of debt 6.10% 6.70%
After-tax WACC 7.9% 10.2%
Selected WACC 9.1%

Archrock'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 Archrock:

cost_of_equity (11.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.26) + 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.