The WACC of HP Inc (HPQ) is 8.9%.
Range | Selected | |
Cost of equity | 9.4% - 12.3% | 10.85% |
Tax rate | 12.8% - 14.2% | 13.5% |
Cost of debt | 4.5% - 4.8% | 4.65% |
WACC | 7.8% - 10.0% | 8.9% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1.2 | 1.33 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 9.4% | 12.3% |
Tax rate | 12.8% | 14.2% |
Debt/Equity ratio | 0.39 | 0.39 |
Cost of debt | 4.5% | 4.8% |
After-tax WACC | 7.8% | 10.0% |
Selected WACC | 8.9% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
HPQ | HP Inc | 0.39 | 1.22 | 0.92 |
ALOT | AstroNova Inc | 0.7 | 0.65 | 0.4 |
CRSR | Corsair Gaming Inc | 0.22 | 2.02 | 1.7 |
DBD | Diebold Nixdorf Inc | 0.54 | 1.15 | 0.78 |
HPE | Hewlett Packard Enterprise Co | 0.82 | 2.01 | 1.18 |
IGOI | iGO Inc | 0.92 | 0.89 | 0.5 |
KODK | Eastman Kodak Co | 1.07 | 1.94 | 1 |
NNDM | Nano Dimension Ltd | 0.04 | 1.11 | 1.08 |
NTAP | NetApp Inc | 0.13 | 1.53 | 1.38 |
STX | Seagate Technology PLC | 0.28 | 1.98 | 1.59 |
Low | High | |
Unlevered beta | 0.97 | 1.12 |
Relevered beta | 1.3 | 1.49 |
Adjusted relevered beta | 1.2 | 1.33 |
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 HPQ:
cost_of_equity (10.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.2) + 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.