BHP.AX WACC - Weighted Average Cost of Capital

The WACC of BHP Group Ltd (BHP.AX) is 10.1%.

The Cost of Equity of BHP Group Ltd (BHP.AX) is 11.35%.

The Cost of Debt of BHP Group Ltd (BHP.AX) is 5.40%.

	Range	Selected
Cost of equity	9.70% - 13.00%	11.35%
Tax rate	36.80% - 39.60%	38.20%
Cost of debt	4.70% - 6.10%	5.40%
WACC	8.7% - 11.6%	10.1%

WACC

BHP.AX WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	5.1%	6.1%
Adjusted beta	1.1	1.31

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.70%	13.00%

Tax rate	36.80%	39.60%
Debt/Equity ratio	0.18	0.18
Cost of debt	4.70%	6.10%

After-tax WACC	8.7%	11.6%


Selected WACC	10.1%

BHP.AX'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 BHP.AX:

cost_of_equity (11.35%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (1.1) + 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.