H&E WACC - Weighted Average Cost of Capital

The WACC of H&E Equipment Services Inc (HEES) is 7.2%.

The Cost of Equity of H&E Equipment Services Inc (HEES) is 8.70%.

The Cost of Debt of H&E Equipment Services Inc (HEES) is 5.30%.

	Range	Selected
Cost of equity	7.50% - 9.90%	8.70%
Tax rate	24.30% - 25.00%	24.65%
Cost of debt	4.50% - 6.10%	5.30%
WACC	6.2% - 8.2%	7.2%

WACC

H&E WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.79	0.89

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.50%	9.90%

Tax rate	24.30%	25.00%
Debt/Equity ratio	0.44	0.44
Cost of debt	4.50%	6.10%

After-tax WACC	6.2%	8.2%


Selected WACC	7.2%

H&E'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 H&E:

cost_of_equity (8.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.79) + 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.