The WACC of Owl Rock Capital Corp (ORCC) is 8.6%.
| Range | Selected | |
| Cost of equity | 9.90% - 17.40% | 13.65% |
| Tax rate | 0.90% - 1.00% | 0.95% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.0% - 10.2% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 1.14 | 2.04 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.90% | 17.40% |
| Tax rate | 0.90% | 1.00% |
| Debt/Equity ratio | 1.38 | 1.38 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.0% | 10.2% |
| 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 ORCC:
cost_of_equity (13.65%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (1.14) + 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.