HD
Home Depot Inc
Price:  
359.38 
USD
Volume:  
2,283,171.00
United States | Specialty Retail
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Home Depot WACC - Weighted Average Cost of Capital

The WACC of Home Depot Inc (HD) is 7.3%.

The Cost of Equity of Home Depot Inc (HD) is 7.85%.
The Cost of Debt of Home Depot Inc (HD) is 5.00%.

Range Selected
Cost of equity 6.90% - 8.80% 7.85%
Tax rate 24.00% - 24.10% 24.05%
Cost of debt 5.00% - 5.00% 5.00%
WACC 6.5% - 8.2% 7.3%
WACC

Home Depot WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.66 0.71
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.90% 8.80%
Tax rate 24.00% 24.10%
Debt/Equity ratio 0.15 0.15
Cost of debt 5.00% 5.00%
After-tax WACC 6.5% 8.2%
Selected WACC 7.3%

Home Depot'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 Home Depot:

cost_of_equity (7.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.66) + 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.