The WACC of Oracle Corp (ORCL) is 8.4%.
Range | Selected | |
Cost of equity | 7.0% - 11.1% | 9.05% |
Tax rate | 9.2% - 11.4% | 10.3% |
Cost of debt | 4.0% - 5.1% | 4.55% |
WACC | 6.5% - 10.2% | 8.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.68 | 1.11 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.0% | 11.1% |
Tax rate | 9.2% | 11.4% |
Debt/Equity ratio | 0.16 | 0.16 |
Cost of debt | 4.0% | 5.1% |
After-tax WACC | 6.5% | 10.2% |
Selected WACC | 8.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
ORCL | Oracle Corp | 0.16 | 1.5 | 1.31 |
APPN | Appian Corp | 0.12 | 1.37 | 1.24 |
BB.TO | BlackBerry Ltd | 0.07 | 1.38 | 1.29 |
FEYE | FireEye Inc | 0.23 | 1.07 | 0.89 |
HS.CN | Healthspace Data Systems Ltd | 0.07 | -1.45 | -1.37 |
INLX | Intellinetics Inc | 0.03 | -0.38 | -0.37 |
RPD | Rapid7 Inc | 0.64 | 0.85 | 0.54 |
SSFT | Sonasoft Corp | 1.24 | 0.3 | 0.14 |
SWI | SolarWinds Corp | 0.38 | 0.43 | 0.32 |
ZS | Zscaler Inc | 0.02 | 1.82 | 1.79 |
Low | High | |
Unlevered beta | 0.45 | 1.03 |
Relevered beta | 0.52 | 1.16 |
Adjusted relevered beta | 0.68 | 1.11 |
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 Oracle:
cost_of_equity (9.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.68) + 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.