GCC WACC – H1 2017

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Subsequent to our note published in January 2017, we have updated the values of equity risk premiums and cost of capital to reflect the changes in cur.....

Summary

Subsequent to our note published in January 2017, we have updated the values of equity risk premiums and cost of capital to reflect the changes in current operating environment. Calculation of risk free rates for GCC countries was previously done by computing the inflation differentials between the country and U.S and summing it with U.S risk free rate, as most of the GCC countries had not issued sovereign bonds earlier. However, in 2016, most of the GCC countries such as UAE, KSA, Oman and Qatar have issued bonds in order to bridge the deficit in their budgets. Therefore, the risk free rate for the GCC countries has now been obtained using the 10-year government bond yield.

In this report, we have computed the weighted average cost of capital (WACC) for all six GCC countries using three different methods, viz. implied ERP, credit ratings and CDS spreads. We have also computed WACC for KSA company (unlisted) as a sample to illustrate the calculations.

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GCC WACC – H1 2017

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