BHP.L WACC - Weighted Average Cost of Capital
The WACC of BHP Group PLC (BHP.L) is 7.5%.
| Range | Selected | |
| Cost of equity | 6.9% - 9.3% | 8.1% |
| Tax rate | 36.2% - 38.0% | 37.1% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 6.4% - 8.6% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 1.7% | 2.2% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 0.96 | 1.04 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.9% | 9.3% |
| Tax rate | 36.2% | 38.0% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 6.4% | 8.6% |
| Selected WACC | 7.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| BHP.L | BHP Group PLC | 0.13 | 1.21 | 1.12 |
| AAL.L | Anglo American PLC | 0.55 | 1.78 | 1.32 |
| AAZ.L | Anglo Asian Mining PLC | 0.11 | 0.58 | 0.54 |
| ERA.PA | Eramet SA | 1.51 | 1.74 | 0.89 |
| GFM.L | Griffin Mining Ltd | 0 | 0.44 | 0.44 |
| IKTIN.AT | Iktinos Hellas Greek Marble Industry SA | 1.18 | 1.12 | 0.64 |
| KMR.L | Kenmare Resources PLC | 0.17 | 0.41 | 0.37 |
| KOZAA.IS | Koza Anadolu Metal Madencilik Isletmeleri AS | 0 | 1.02 | 1.02 |
| MTL.L | Metals Exploration PLC | 0.09 | -0.46 | -0.44 |
| RIO.L | Rio Tinto PLC | 0.14 | 1.12 | 1.03 |
| Low | High | |
| Unlevered beta | 0.6 | 0.94 |
| Relevered beta | 0.94 | 1.06 |
| Adjusted relevered beta | 0.96 | 1.04 |
BHP.L'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.L:
cost_of_equity (8.10%) = risk_free_rate (1.95%) + equity_risk_premium (5.80%) * adjusted_beta (0.96) + 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.