The WACC of W&T Offshore Inc (WTI) is 8.2%.
| Range | Selected | |
| Cost of equity | 4.60% - 7.50% | 6.05% |
| Tax rate | 17.80% - 31.90% | 24.85% |
| Cost of debt | 8.80% - 23.90% | 16.35% |
| WACC | 5.6% - 10.8% | 8.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -0.29 | 0.12 |
| Additional risk adjustments | 2.0% | 2.5% |
| Cost of equity | 4.60% | 7.50% |
| Tax rate | 17.80% | 31.90% |
| Debt/Equity ratio | 0.6 | 0.6 |
| Cost of debt | 8.80% | 23.90% |
| After-tax WACC | 5.6% | 10.8% |
| Selected WACC | 8.2% | |
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 WTI:
cost_of_equity (6.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-0.29) + risk_adjustments (2.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.