PSX WACC - Weighted Average Cost of Capital
The WACC of Phillips 66 (PSX) is 7.4%.
| Range | Selected | |
| Cost of equity | 6.5% - 10.7% | 8.6% |
| Tax rate | 20.8% - 22.7% | 21.75% |
| Cost of debt | 4.2% - 7.5% | 5.85% |
| WACC | 5.5% - 9.2% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.58 | 1.04 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.5% | 10.7% |
| Tax rate | 20.8% | 22.7% |
| Debt/Equity ratio | 0.44 | 0.44 |
| Cost of debt | 4.2% | 7.5% |
| After-tax WACC | 5.5% | 9.2% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PSX | Phillips 66 | 0.44 | 1.13 | 0.84 |
| BDCO | Blue Dolphin Energy Co | 2.18 | -0.62 | -0.23 |
| CRDE | Cardinal Ethanol LLC | 0.13 | 0.03 | 0.03 |
| DK | Delek US Holdings Inc | 2.9 | 1.45 | 0.44 |
| GIII.V | Gen III Oil Corp | 0.12 | -0.07 | -0.06 |
| HFC | HollyFrontier Corp | 0.53 | 1.58 | 1.12 |
| MPC | Marathon Petroleum Corp | 0.58 | 1.09 | 0.75 |
| PBF | PBF Energy Inc | 0.65 | 1.39 | 0.92 |
| VLO | Valero Energy Corp | 0.27 | 1.22 | 1.01 |
| VTNR | Vertex Energy Inc | 72.03 | 1.02 | 0.02 |
| Low | High | |
| Unlevered beta | 0.28 | 0.79 |
| Relevered beta | 0.37 | 1.06 |
| Adjusted relevered beta | 0.58 | 1.04 |
PSX'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 PSX:
cost_of_equity (8.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.58) + 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.