The WACC of Cypress Environmental Partners LP (CELP) is 8.2%.
| Range | Selected | |
| Cost of equity | 14.70% - 19.30% | 17.00% |
| Tax rate | 10.90% - 25.50% | 18.20% |
| Cost of debt | 4.70% - 7.00% | 5.85% |
| WACC | 7.1% - 9.2% | 8.2% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 2.73 | 2.89 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.70% | 19.30% |
| Tax rate | 10.90% | 25.50% |
| Debt/Equity ratio | 2.54 | 2.54 |
| Cost of debt | 4.70% | 7.00% |
| After-tax WACC | 7.1% | 9.2% |
| Selected WACC | 8.2% | |
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 CELP:
cost_of_equity (17.00%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (2.73) + 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.