The WACC of ONEOK Inc (OKE) is 5.2%.
| Range | Selected | |
| Cost of equity | 4.70% - 7.00% | 5.85% |
| Tax rate | 23.80% - 24.10% | 23.95% |
| Cost of debt | 5.10% - 5.10% | 5.10% |
| WACC | 4.4% - 5.9% | 5.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.03 | 0.21 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 4.70% | 7.00% |
| Tax rate | 23.80% | 24.10% |
| Debt/Equity ratio | 0.55 | 0.55 |
| Cost of debt | 5.10% | 5.10% |
| After-tax WACC | 4.4% | 5.9% |
| Selected WACC | 5.2% | |
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 ONEOK:
cost_of_equity (5.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.03) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.