GDP WACC - Weighted Average Cost of Capital
The WACC of Goodrich Petroleum Corp (GDP) is 6.2%.
| Range | Selected | |
| Cost of equity | 5.8% - 8.7% | 7.25% |
| Tax rate | 27.0% - 27.0% | 27% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 5.1% - 7.3% | 6.2% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.63 | 0.86 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.8% | 8.7% |
| Tax rate | 27.0% | 27.0% |
| Debt/Equity ratio | 0.35 | 0.35 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 5.1% | 7.3% |
| Selected WACC | 6.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| GDP | Goodrich Petroleum Corp | 0.35 | 1.62 | 1.28 |
| BATL | Battalion Oil Corp | 8.86 | 2.09 | 0.28 |
| CRBO | Carbon Energy Corp | 2.9 | -0.43 | -0.14 |
| ERINQ | Erin Energy Corp | 1251797.1 | -94.37 | 0 |
| ORC.B.V | Orca Exploration Group Inc | 0.35 | 1.03 | 0.82 |
| PNE.TO | Pine Cliff Energy Ltd | 0.29 | 1.18 | 0.97 |
| PNRG | Primeenergy Resources Corp | 0.01 | 1.5 | 1.49 |
| REI | Ring Energy Inc | 2.21 | 1.12 | 0.43 |
| SNM.V | ShaMaran Petroleum Corp | 0.51 | 1.49 | 1.08 |
| STPJF | Southern Pacific Resource Corp | 40574.79 | 3.55 | 0 |
| Low | High | |
| Unlevered beta | 0.37 | 0.88 |
| Relevered beta | 0.45 | 0.79 |
| Adjusted relevered beta | 0.63 | 0.86 |
GDP'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 GDP:
cost_of_equity (7.25%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.63) + 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.