The WACC of Petrofac Ltd (PFC.L) is 8.5%.
| Range | Selected | |
| Cost of equity | 69.00% - 93.00% | 81.00% |
| Tax rate | 3.30% - 7.00% | 5.15% |
| Cost of debt | 6.30% - 7.00% | 6.65% |
| WACC | 7.9% - 9.0% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 10.86 | 12.6 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 69.00% | 93.00% |
| Tax rate | 3.30% | 7.00% |
| Debt/Equity ratio | 33.71 | 33.71 |
| Cost of debt | 6.30% | 7.00% |
| After-tax WACC | 7.9% | 9.0% |
| Selected WACC | 8.5% | |
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 PFC.L:
cost_of_equity (81.00%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (10.86) + 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.