HD
Home Depot Inc
Price:  
371.68 
USD
Volume:  
2,573,631.00
United States | Specialty Retail
Valuation
Overview
Financials
Forecast
Compare
Historical Price
SolvencyDividends
Transactions
People

Home Depot WACC - Weighted Average Cost of Capital

The WACC of Home Depot Inc (HD) is 7.6%.

The Cost of Equity of Home Depot Inc (HD) is 8.20%.
The Cost of Debt of Home Depot Inc (HD) is 4.50%.

Range Selected
Cost of equity 7.10% - 9.30% 8.20%
Tax rate 24.00% - 24.10% 24.05%
Cost of debt 4.50% - 4.50% 4.50%
WACC 6.7% - 8.5% 7.6%
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 0.71 0.79
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.10% 9.30%
Tax rate 24.00% 24.10%
Debt/Equity ratio 0.14 0.14
Cost of debt 4.50% 4.50%
After-tax WACC 6.7% 8.5%
Selected WACC 7.6%

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 (8.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.71) + 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.