FHB WACC - Weighted Average Cost of Capital
The WACC of First Hawaiian Inc (FHB) is 7.4%.
| Range | Selected | |
| Cost of equity | 9.6% - 12.2% | 10.9% |
| Tax rate | 23.8% - 23.9% | 23.85% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.7% - 8.0% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.26 | 1.31 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.6% | 12.2% |
| Tax rate | 23.8% | 23.9% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.7% | 8.0% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FHB | First Hawaiian Inc | 0.88 | 0.77 | 0.46 |
| COLB | Columbia Banking System Inc | 0.14 | 1.03 | 0.94 |
| CZFS | Citizens Financial Services Inc | 0.21 | 1.17 | 1.01 |
| EGBN | Eagle Bancorp Inc | 0.21 | 0.65 | 0.56 |
| IBTX | Independent Bank Group Inc | 0.13 | 0.9 | 0.82 |
| LCNB | LCNB Corp | 0.05 | 0.57 | 0.55 |
| PMBC | Pacific Mercantile Bancorp | 0.08 | 0.87 | 0.82 |
| PPBI | Pacific Premier Bancorp Inc | 0.13 | 0.94 | 0.85 |
| SFST | Southern First Bancshares Inc | 0.08 | 0.93 | 0.87 |
| UVSP | Univest Financial Corp | 0.19 | 0.84 | 0.73 |
| Low | High | |
| Unlevered beta | 0.78 | 0.83 |
| Relevered beta | 1.39 | 1.46 |
| Adjusted relevered beta | 1.26 | 1.31 |
FHB'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 FHB:
cost_of_equity (10.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.26) + 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.