HCA WACC - Weighted Average Cost of Capital
The WACC of HCA Healthcare Inc (HCA) is 6.7%.
| Range | Selected | |
| Cost of equity | 7.0% - 9.2% | 8.1% |
| Tax rate | 20.7% - 21.2% | 20.95% |
| Cost of debt | 4.9% - 5.1% | 5% |
| WACC | 6.0% - 7.5% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.68 | 0.78 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.0% | 9.2% |
| Tax rate | 20.7% | 21.2% |
| Debt/Equity ratio | 0.5 | 0.5 |
| Cost of debt | 4.9% | 5.1% |
| After-tax WACC | 6.0% | 7.5% |
| Selected WACC | 6.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HCA | HCA Healthcare Inc | 0.5 | 0.36 | 0.26 |
| ACHC | Acadia Healthcare Company Inc | 0.98 | 0.79 | 0.44 |
| BKD | Brookdale Senior Living Inc | 2.42 | 0.28 | 0.1 |
| CYH | Community Health Systems Inc | 22.74 | 1.39 | 0.07 |
| EHC | Encompass Health Corp | 0.22 | 0.63 | 0.54 |
| ENSG | Ensign Group Inc | 0.02 | 0.29 | 0.28 |
| GEN | Genesis Healthcare Inc | 0.44 | 0.76 | 0.56 |
| SEM | Select Medical Holdings Corp | 0.94 | 0.83 | 0.48 |
| THC | Tenet Healthcare Corp | 0.81 | 1.05 | 0.64 |
| UHS | Universal Health Services Inc | 0.41 | 0.65 | 0.49 |
| Low | High | |
| Unlevered beta | 0.38 | 0.48 |
| Relevered beta | 0.52 | 0.67 |
| Adjusted relevered beta | 0.68 | 0.78 |
HCA'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 HCA:
cost_of_equity (8.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.68) + 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.