SUN WACC - Weighted Average Cost of Capital
The WACC of Sunoco LP (SUN) is 7.8%.
| Range | Selected | |
| Cost of equity | 7.7% - 10.8% | 9.25% |
| Tax rate | 7.2% - 9.1% | 8.15% |
| Cost of debt | 6.5% - 7.5% | 7% |
| WACC | 6.9% - 8.8% | 7.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.83 | 1.07 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.7% | 10.8% |
| Tax rate | 7.2% | 9.1% |
| Debt/Equity ratio | 0.99 | 0.99 |
| Cost of debt | 6.5% | 7.5% |
| After-tax WACC | 6.9% | 8.8% |
| Selected WACC | 7.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SUN | Sunoco LP | 0.99 | 0.73 | 0.38 |
| AE | Adams Resources & Energy Inc | 0.49 | 0.13 | 0.09 |
| CLNE | Clean Energy Fuels Corp | 0.75 | 1.49 | 0.88 |
| DK | Delek US Holdings Inc | 2.9 | 1.45 | 0.39 |
| HFC | HollyFrontier Corp | 0.53 | 1.58 | 1.06 |
| INT | World Fuel Services Corp | 0.56 | 1.2 | 0.8 |
| LNG | Cheniere Energy Inc | 0.45 | 0.85 | 0.6 |
| NGL | NGL Energy Partners LP | 7.1 | 0.34 | 0.05 |
| PKI.TO | Parkland Corp | 0.98 | 1.06 | 0.56 |
| PTTN | Patten Energy Solutions Group Inc | 97.29 | 0 | 0 |
| Low | High | |
| Unlevered beta | 0.39 | 0.58 |
| Relevered beta | 0.75 | 1.1 |
| Adjusted relevered beta | 0.83 | 1.07 |
SUN'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 SUN:
cost_of_equity (9.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.83) + 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.