The WACC of Pimco Energy and Tactical Credit Opportunities Fund (NRGX) is 8.6%.
| Range | Selected | |
| Cost of equity | 8.30% - 11.40% | 9.85% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 5.50% - 5.50% | 5.50% |
| WACC | 7.4% - 9.8% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.83 | 1.03 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.30% | 11.40% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 0.27 | 0.27 |
| Cost of debt | 5.50% | 5.50% |
| After-tax WACC | 7.4% | 9.8% |
| Selected WACC | 8.6% | |
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 NRGX:
cost_of_equity (9.85%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.83) + 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.