HGTXU WACC - Weighted Average Cost of Capital
The WACC of Hugoton Royalty Trust (HGTXU) is 5.0%.
| Range | Selected | |
| Cost of equity | 5.4% - 7.1% | 6.25% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.6% - 5.4% | 5.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.34 | 0.39 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.4% | 7.1% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.6% | 5.4% |
| Selected WACC | 5.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HGTXU | Hugoton Royalty Trust | 1.06 | 0.18 | 0.1 |
| DBRM | Daybreak Oil and Gas Inc | 36.67 | 1.51 | 0.05 |
| FECOF | FEC Resources Inc | 0.36 | -0.19 | -0.15 |
| FNRC | 1st NRG Corp | 320.29 | 0 | 0 |
| IFR.V | International Frontier Resources Corp | 0.06 | 0.95 | 0.91 |
| JBR.CN | James Bay Resources Ltd | 0.51 | -1.9 | -1.39 |
| PNRC | Premier Energy Corp | 0.19 | 1.07 | 0.94 |
| PROP | Pledge Petroleum Corp | 0.28 | 2.08 | 1.72 |
| TRSI | Trophy Resources Inc | 34.07 | 1.23 | 0.05 |
| VRY.V | Petro Victory Energy Corp | 0.9 | -1.58 | -0.95 |
| Low | High | |
| Unlevered beta | 0.03 | 0.07 |
| Relevered beta | 0.01 | 0.09 |
| Adjusted relevered beta | 0.34 | 0.39 |
HGTXU'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 HGTXU:
cost_of_equity (6.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.34) + 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.