ERHE WACC - Weighted Average Cost of Capital
The WACC of ERHC Energy Inc (ERHE) is 5.9%.
| Range | Selected | |
| Cost of equity | 5.2% - 11.2% | 8.2% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.5% - 7.4% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.3 | 1.13 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.2% | 11.2% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.5% | 7.4% |
| Selected WACC | 5.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ERHE | ERHC Energy Inc | 0.74 | 699.23 | 452.99 |
| FECOF | FEC Resources Inc | 0.46 | -0.09 | -0.07 |
| FNRC | 1st NRG Corp | 320.29 | 0 | 0 |
| IFNY | Infinity Energy Resources Inc | 0.57 | 1.67 | 1.18 |
| IFR.V | International Frontier Resources Corp | 0.06 | 0.95 | 0.91 |
| JBR.CN | James Bay Resources Ltd | 0.51 | -1.93 | -1.4 |
| PCQ.V | Petrolympic Ltd | 0 | -1.03 | -1.03 |
| SNV.V | Sonoro Energy Ltd | 0.03 | 0.56 | 0.54 |
| STMP.V | Stamper Oil & Gas Corp | 0 | 1.88 | 1.88 |
| VRY.V | Petro Victory Energy Corp | 0.64 | -0.81 | -0.55 |
| Low | High | |
| Unlevered beta | -0.03 | 0.69 |
| Relevered beta | -0.04 | 1.19 |
| Adjusted relevered beta | 0.3 | 1.13 |
ERHE'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 ERHE:
cost_of_equity (8.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.3) + 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.