PRU
Prudential Financial Inc
Price:  
103.59 
USD
Volume:  
1,010,837.00
United States | Insurance
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Prudential WACC - Weighted Average Cost of Capital

The WACC of Prudential Financial Inc (PRU) is 7.0%.

The Cost of Equity of Prudential Financial Inc (PRU) is 8.75%.
The Cost of Debt of Prudential Financial Inc (PRU) is 5.00%.

Range Selected
Cost of equity 7.30% - 10.20% 8.75%
Tax rate 17.40% - 19.00% 18.20%
Cost of debt 5.00% - 5.00% 5.00%
WACC 6.1% - 7.9% 7.0%
WACC

Prudential WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.74 0.96
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.30% 10.20%
Tax rate 17.40% 19.00%
Debt/Equity ratio 0.59 0.59
Cost of debt 5.00% 5.00%
After-tax WACC 6.1% 7.9%
Selected WACC 7.0%

Prudential's CAPM model and how its cost of Equity is calculated

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 Prudential:

cost_of_equity (8.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.74) + 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.