American Electric Power Company Inc (AEP) WACC Analysis

As of May 25, 2025, American Electric Power Company Inc (AEP) carries a Weighted Average Cost of Capital (WACC) of 5.6%. WACC reflects the blended rate American Electric Power Company Inc must pay to both equity and debt holders.

Within that, the cost of equity is 5.8%, the cost of debt is 4.0%, and the effective tax rate is 2.0%.

Breakdown of WACC Components

• Long-term bond rate: 3.9% – 4.4%
• Equity market risk premium: 4.6% – 5.6%
• Adjusted beta: 0.42 – 0.45
• Additional risk adjustment: 0.0% – 0.5%
• Debt-to-equity ratio: 0.83

What It Means for Investors

With a selected WACC of 5.6%, American Electric Power Company Inc must ensure any new investment returns exceed this threshold to generate shareholder value. This level reflects an attractive low cost of capital.