The WACC of Seadrill Ltd (SDRL.OL) is 8.0%.
| Range | Selected | |
| Cost of equity | 778.50% - 1,128.40% | 953.45% |
| Tax rate | 1.60% - 2.50% | 2.05% |
| Cost of debt | 6.80% - 7.00% | 6.90% |
| WACC | 7.7% - 8.3% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 163.59 | 195.87 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 778.50% | 1,128.40% |
| Tax rate | 1.60% | 2.50% |
| Debt/Equity ratio | 782.19 | 782.19 |
| Cost of debt | 6.80% | 7.00% |
| After-tax WACC | 7.7% | 8.3% |
| Selected WACC | 8.0% | |
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 SDRL.OL:
cost_of_equity (953.45%) = risk_free_rate (3.35%) + equity_risk_premium (5.20%) * adjusted_beta (163.59) + 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.