MPC WACC - Weighted Average Cost of Capital

The WACC of Marathon Petroleum Corp (MPC) is 8.0%.

The Cost of Equity of Marathon Petroleum Corp (MPC) is 10.25%.

The Cost of Debt of Marathon Petroleum Corp (MPC) is 4.70%.

	Range	Selected
Cost of equity	8.80% - 11.70%	10.25%
Tax rate	16.70% - 18.80%	17.75%
Cost of debt	4.30% - 5.10%	4.70%
WACC	6.9% - 9.0%	8.0%

WACC

MPC WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	1.07	1.22

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.80%	11.70%

Tax rate	16.70%	18.80%
Debt/Equity ratio	0.55	0.55
Cost of debt	4.30%	5.10%

After-tax WACC	6.9%	9.0%


Selected WACC	8.0%

MPC'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 MPC:

cost_of_equity (10.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.07) + 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.