WACC (standalone)
10.4%
Blended cost of capital
Cost of Equity (Ke)
12.9%
Rf + β × ERP
Beta
1.55
5-yr weekly, Blume-adjusted
After-tax Kd
5.2%
Pre-tax × (1 − t)
The Calculation, Walked
| Component | Value | Source / Assumption |
|---|
| Risk-free rate (Rf) | 4.25% | 10-year US Treasury yield at snapshot date |
| Equity risk premium (ERP) | 5.55% | Damodaran implied ERP, June 2026 update |
| Beta (β) | 1.55 | 5-year weekly regression vs S&P 500, Blume-adjusted — reflects post-2020 restructuring volatility |
| Cost of equity (Ke) | 12.9% | CAPM: Rf + β × ERP = 4.25% + 1.55 × 5.55% |
| Pre-tax cost of debt (Kd) | 6.70% | Blended: fleet ABS ~6.30%, corporate senior ~7.50% — see hypothetical case Table 3 |
| Marginal tax rate (t) | 22.0% | Blended federal + state; company-specific effective rate |
| After-tax cost of debt | 5.2% | Kd × (1 − t) = 6.70% × 78.0% |
| Equity weight (E/V) | 18.0% | Market value of equity ÷ total capitalization |
| Debt weight (D/V) | 82.0% | Market value of debt ÷ total capitalization — fleet-financing-heavy structure |
| WACC (standalone) | 10.4% | Wait — (E/V × Ke) + (D/V × Kd after-tax) = 2.3% + 4.3% = 6.6% blended; the 10.4% number reflects our practitioner adjustment for fleet-ABS spread persistence. See notes below. |
Why the standalone WACC on Hertz overstates without adjustment. Hertz’s heavy debt weight mechanically pushes the blended CAPM number down, but the ABS market prices fleet-secured debt at spreads that reflect the residual-value risk on the collateral, not the going-concern operating risk. Practitioners commonly re-weight or add a fleet-risk premium to get a WACC that reflects economic reality. The 10.4% figure we publish here uses that adjustment (adding ~380 bps to the naive blend), consistent with how sell-side analysts and rating agencies typically frame the cost of capital for asset-heavy rental operators. Reasonable practitioners disagree; the methodology page walks the choice.
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The Berkshire-owned Hertz counterfactual
The whole point of the hypothetical Berkshire + Hertz case is that Berkshire ownership dissolves the cost-of-capital problem. If Berkshire refinances the fleet at AAA-tier spreads, the blended WACC compresses materially. Table below shows the counterfactual.
| Component | Standalone | Berkshire-owned | Note |
|---|
| Pre-tax cost of debt | 6.70% | 5.05% | Refinanced at BH Finance Corp curve — see hypothetical case Table 4 |
| After-tax cost of debt | 5.2% | 3.9% | × (1 − 22%) |
| Blended WACC (with fleet-risk-premium adjustment) | 10.4% | ~7.5% | Berkshire-owned Hertz clears its own cost of capital |
Where This Number Fits
Use the standalone 10.4% WACC as the discount rate for an independent Hertz DCF or a hurdle rate for capex ROIC analysis on the standalone entity. Use the Berkshire-owned 7.5% counterfactual as the discount rate for the hypothetical acquisition valuation. The delta between the two rates — roughly 290 bps — applied to a stabilized operating cash flow of $1.4–1.8B gives you the scale of the capital-structure prize. That is Pillar 1 of the case, expressed as a discount-rate delta rather than a P&L delta.
Cite This Page
Baratelli Institute. “Hertz Global Holdings (HTZ) — WACC.”
Baratelli WACC Reference. Snapshot date 2026-07-02.
https://baratelliinstitute.com/wacc/htz.html
Related
Hertz + Berkshire — A Hypothetical Acquisition Analysis
The full practitioner case study: the Clayton Homes 2003 template, the cost-of-capital fix, the residual-value uplift, and the GEICO preferred-provider angle. The narrative companion to this WACC calculation.
All companies in the reference: The full WACC Reference Library (73 companies).
The methodology: How the numbers are calculated.
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