BDCO WACC - Weighted Average Cost of Capital

The WACC of Blue Dolphin Energy Co (BDCO) is 8.3%.

The Cost of Equity of Blue Dolphin Energy Co (BDCO) is 6.30%.

The Cost of Debt of Blue Dolphin Energy Co (BDCO) is 9.45%.

	Range	Selected
Cost of equity	5.50% - 7.10%	6.30%
Tax rate	0.60% - 1.20%	0.90%
Cost of debt	7.00% - 11.90%	9.45%
WACC	6.5% - 10.1%	8.3%

WACC

BDCO WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.36	0.39

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.50%	7.10%

Tax rate	0.60%	1.20%
Debt/Equity ratio	1.89	1.89
Cost of debt	7.00%	11.90%

After-tax WACC	6.5%	10.1%


Selected WACC	8.3%

BDCO'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 BDCO:

cost_of_equity (6.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.36) + 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.