View All num of num See all Photos Halliburton www.halliburton.com Engaged Employer Overview Reviews Salaries Interviews Jobs Photos Benefits 778 Reviews 1.2k Salaries 431 Interviews 261 Jobs Follow Add Review or Salary Follow Add Review or Salary Interview Question Corporate Development Analyst Interview(Student Candidate) Houston, TX Halliburton What do you think is the WACC of Halliburton? Tags: See more , See less 8 Answer Add Tags Answer Interview Answer 1 Answer ▲ 3 ▼ So the equation for WACC is %D*Dc*Tax Shield + %E+EcAnd in calculating this there a couple of factors involved here: the capitalization, the cost of debt, the tax rate, and the cost of equity Capitalization: I know from your 10-K that you have ~3.8 Bn in debt, and your mkt cap is ~35 bn. For the sake of mental math lets say that you have 4 bn in debt, and 40bn in total capital. Therefore you would be 10% debt financed, and 90% equity financed.As for the debt: I saw that you recently priced some 10 yr bonds with an interest rate of 3.25%. So I will assume the cost of debt is 3.25%. Multiply that by the 10% that your firm’s financing is attributable to debt, and that number is already less than 1%. Then you need to multiply it by the tax shield, which brings me to the next stageThe Tax rate: I saw on your 10-K that you were taxed $850mm out of 2.6 bn in Operating income before taxes. That’s roughly 1/3. So I will assume a 33% corporate tax, which would mean the tax shield would equal 67%. When you multiply the tax shield and the previous debt associated number we arrived at, this number would be tiny. To be exact we said 10% of 3.25% would be less than a percent, .003, that times .67 would be something like .2% for the debt portion of the equation.As for the Equity: we already established that the firm is 90% capitalized by equity. So the only thing left to do is figure out the Cost of Equity. I would do this by using CAPM. Risk free rate plus the product of beta and market risk premium. Since I used the 10yr bonds as the cost of debt earlier, I will reference the 10yr US Treas as a the risk free rate. It is currently yielding 2%. I saw on Bloomberg that your firm has a beta of 1.58, or call it 1.6. the only thing left in the CAPM is the market risk premium. Now that can be an arbitrary #, but I know that the Oilfield services etf XES has a return of 8%. Therefore 8-2=6%. SO- 1.5x6= 9, lets call it 10. Add the riskfree rate of 2%, and the CAPM would be 12%.So 12% x 90% ~ 11%. Then add that small percentage attributable to the cost of debt, and I bet that Halliburton’s WACC is somewhere between 11.5-12.5% Interview Candidate on Jan 6, 2012 Interviews > Corporate Development Analyst > Halliburton Add Answers or Comments To comment on this, Sign In or Sign Up.