HPP WACC - Weighted Average Cost of Capital

The WACC of Hudson Pacific Properties Inc (HPP) is 4.7%.

The Cost of Equity of Hudson Pacific Properties Inc (HPP) is 13.50%.

The Cost of Debt of Hudson Pacific Properties Inc (HPP) is 5.50%.

	Range	Selected
Cost of equity	7.80% - 19.20%	13.50%
Tax rate	26.20% - 27.00%	26.60%
Cost of debt	4.00% - 7.00%	5.50%
WACC	3.3% - 6.1%	4.7%

WACC

HPP WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.86	2.57

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.80%	19.20%

Tax rate	26.20%	27.00%
Debt/Equity ratio	13.28	13.28
Cost of debt	4.00%	7.00%

After-tax WACC	3.3%	6.1%


Selected WACC	4.7%

HPP'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 HPP:

cost_of_equity (13.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.86) + 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.