The WACC of Valvoline Inc (VVV) is 7.7%.
Range | Selected | |
Cost of equity | 7.6% - 10.1% | 8.85% |
Tax rate | 23.7% - 24.2% | 23.95% |
Cost of debt | 4.0% - 5.1% | 4.55% |
WACC | 6.6% - 8.8% | 7.7% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.8 | 0.94 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.6% | 10.1% |
Tax rate | 23.7% | 24.2% |
Debt/Equity ratio | 0.27 | 0.27 |
Cost of debt | 4.0% | 5.1% |
After-tax WACC | 6.6% | 8.8% |
Selected WACC | 7.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
VVV | Valvoline Inc | 0.27 | 0.7 | 0.58 |
ASIX | AdvanSix Inc | 0.32 | 1.25 | 1.01 |
AVNT | Avient Corp | 0.66 | 1.45 | 0.97 |
CBT | Cabot Corp | 0.27 | 0.86 | 0.72 |
CHE.UN.TO | Chemtrade Logistics Income Fund | 0.71 | 1.27 | 0.83 |
KOP | Koppers Holdings Inc | 1.37 | 1.21 | 0.59 |
KRO | Kronos Worldwide Inc | 0.68 | 1.37 | 0.9 |
OEC | Orion Engineered Carbons SA | 1.57 | 1.18 | 0.54 |
TROX | Tronox Holdings PLC | 3.17 | 1.9 | 0.56 |
WLKP | Westlake Chemical Partners LP | 0.51 | 0.14 | 0.1 |
Low | High | |
Unlevered beta | 0.59 | 0.76 |
Relevered beta | 0.7 | 0.91 |
Adjusted relevered beta | 0.8 | 0.94 |
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 Valvoline:
cost_of_equity (8.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.8) + 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.