The WACC of TGS NOPEC Geophysical Company ASA (TGS.OL) is 6.1%.
| Range | Selected | |
| Cost of equity | 6.20% - 7.90% | 7.05% |
| Tax rate | 34.40% - 45.00% | 39.70% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.5% - 6.8% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.55 | 0.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.20% | 7.90% |
| Tax rate | 34.40% | 45.00% |
| Debt/Equity ratio | 0.29 | 0.29 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.5% | 6.8% |
| Selected WACC | 6.1% | |
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 TGS.OL:
cost_of_equity (7.05%) = risk_free_rate (3.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.55) + 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.