HUM
Humana Inc
Price:  
258.48 
USD
Volume:  
1,740,022.00
United States | Health Care Providers & Services
Valuation
Overview
Financials
Forecast
Compare
Historical Price
SolvencyDividends
Transactions
People

Humana WACC - Weighted Average Cost of Capital

The WACC of Humana Inc (HUM) is 7.1%.

The Cost of Equity of Humana Inc (HUM) is 8.25%.
The Cost of Debt of Humana Inc (HUM) is 5.00%.

Range Selected
Cost of equity 6.70% - 9.80% 8.25%
Tax rate 22.90% - 24.30% 23.60%
Cost of debt 5.00% - 5.00% 5.00%
WACC 5.9% - 8.2% 7.1%
WACC

Humana WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.62 0.89
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.70% 9.80%
Tax rate 22.90% 24.30%
Debt/Equity ratio 0.38 0.38
Cost of debt 5.00% 5.00%
After-tax WACC 5.9% 8.2%
Selected WACC 7.1%

Humana'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 Humana:

cost_of_equity (8.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.62) + 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.