The WACC of USD Partners LP (USDP) is 13.5%.
| Range | Selected | |
| Cost of equity | 94.30% - 342.30% | 218.30% |
| Tax rate | 3.30% - 6.20% | 4.75% |
| Cost of debt | 4.30% - 23.90% | 14.10% |
| WACC | 4.3% - 22.7% | 13.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 19.66 | 60.25 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 94.30% | 342.30% |
| Tax rate | 3.30% | 6.20% |
| Debt/Equity ratio | 1006.17 | 1006.17 |
| Cost of debt | 4.30% | 23.90% |
| After-tax WACC | 4.3% | 22.7% |
| Selected WACC | 13.5% | |
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 USDP:
cost_of_equity (218.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (19.66) + 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.