The WACC of Flex Foods Ltd (523672.BO) is 8.4%.
| Range | Selected | |
| Cost of equity | 20.80% - 28.80% | 24.80% |
| Tax rate | 24.60% - 25.40% | 25.00% |
| Cost of debt | 7.00% - 7.70% | 7.35% |
| WACC | 7.6% - 9.2% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.68 | 2.25 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 20.80% | 28.80% |
| Tax rate | 24.60% | 25.40% |
| Debt/Equity ratio | 5.59 | 5.59 |
| Cost of debt | 7.00% | 7.70% |
| After-tax WACC | 7.6% | 9.2% |
| Selected WACC | 8.4% | |
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 523672.BO:
cost_of_equity (24.80%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.68) + 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.