The WACC of Baker Hughes Co (BKR) is 8.8%.
Range | Selected | |
Cost of equity | 8.5% - 11.0% | 9.75% |
Tax rate | 26.2% - 27.0% | 26.6% |
Cost of debt | 4.5% - 4.6% | 4.55% |
WACC | 7.8% - 9.9% | 8.8% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1 | 1.1 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.5% | 11.0% |
Tax rate | 26.2% | 27.0% |
Debt/Equity ratio | 0.16 | 0.16 |
Cost of debt | 4.5% | 4.6% |
After-tax WACC | 7.8% | 9.9% |
Selected WACC | 8.8% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
BKR | Baker Hughes Co | 0.16 | 0.91 | 0.81 |
AROC | Archrock Inc | 0.5 | 1.31 | 0.96 |
HAL | Halliburton Co | 0.46 | 1.03 | 0.77 |
LBRT | Liberty Oilfield Services Inc | 0.25 | 1.28 | 1.09 |
NEX | Nextier Oilfield Solutions Inc | 0.17 | 1.35 | 1.2 |
PUMP | ProPetro Holding Corp | 0.14 | 1.49 | 1.36 |
SCL.TO | Shawcor Ltd | 0.21 | 1.12 | 0.97 |
SES.TO | Secure Energy Services Inc | 0.13 | 1.33 | 1.22 |
SLB | Schlumberger NV | 0.27 | 0.93 | 0.78 |
SLCA | U.S. Silica Holdings Inc | 0.69 | 0.47 | 0.31 |
Low | High | |
Unlevered beta | 0.9 | 1.02 |
Relevered beta | 1 | 1.15 |
Adjusted relevered beta | 1 | 1.1 |
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 BKR:
cost_of_equity (9.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (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.