KNOP WACC - Weighted Average Cost of Capital
The WACC of Knot Offshore Partners LP (KNOP) is 8.6%.
| Range | Selected | |
| Cost of equity | 8.3% - 13.5% | 10.9% |
| Tax rate | 1.3% - 2.6% | 1.95% |
| Cost of debt | 4.0% - 12.4% | 8.2% |
| WACC | 4.9% - 12.4% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.97 | 1.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.3% | 13.5% |
| Tax rate | 1.3% | 2.6% |
| Debt/Equity ratio | 3.82 | 3.82 |
| Cost of debt | 4.0% | 12.4% |
| After-tax WACC | 4.9% | 12.4% |
| Selected WACC | 8.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| KNOP | Knot Offshore Partners LP | 3.82 | 0.07 | 0.01 |
| ASC | Ardmore Shipping Corp | 0.09 | 0.33 | 0.3 |
| GLOP | GasLog Partners LP | 2.15 | 0.66 | 0.21 |
| GMLP | Golar LNG Partners LP | 5.06 | 1.12 | 0.19 |
| LPG | Dorian LPG Ltd | 0.45 | 1.16 | 0.8 |
| NAT | Nordic American Tanker Ltd | 0.46 | 0.73 | 0.5 |
| NNA | Navios Maritime Acquisition Corp | 18.68 | 1.91 | 0.1 |
| NVGS | Navigator Holdings Ltd | 0.79 | 1.1 | 0.62 |
| OSG | Overseas Shipholding Group Inc | 0.66 | 0.3 | 0.18 |
| PBFX | PBF Logistics LP | 0.5 | 1.27 | 0.85 |
| Low | High | |
| Unlevered beta | 0.2 | 0.38 |
| Relevered beta | 0.96 | 1.81 |
| Adjusted relevered beta | 0.97 | 1.54 |
KNOP'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 KNOP:
cost_of_equity (10.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.97) + 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.