TH WACC - Weighted Average Cost of Capital

The WACC of Target Hospitality Corp (TH) is 7.9%.

The Cost of Equity of Target Hospitality Corp (TH) is 8.15%.

The Cost of Debt of Target Hospitality Corp (TH) is 9.25%.

	Range	Selected
Cost of equity	7.20% - 9.10%	8.15%
Tax rate	24.40% - 27.40%	25.90%
Cost of debt	9.10% - 9.40%	9.25%
WACC	7.1% - 8.7%	7.9%

WACC

TH WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.72	0.75

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.20%	9.10%

Tax rate	24.40%	27.40%
Debt/Equity ratio	0.2	0.2
Cost of debt	9.10%	9.40%

After-tax WACC	7.1%	8.7%


Selected WACC	7.9%

TH'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 TH:

cost_of_equity (8.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.72) + 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.