The WACC of Anglo American PLC (AAL.L) is 8.6%.
| Range | Selected | |
| Cost of equity | 10.00% - 13.70% | 11.85% |
| Tax rate | 38.00% - 48.50% | 43.25% |
| Cost of debt | 4.10% - 5.20% | 4.65% |
| WACC | 7.4% - 9.8% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.01 | 1.24 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.00% | 13.70% |
| Tax rate | 38.00% | 48.50% |
| Debt/Equity ratio | 0.54 | 0.54 |
| Cost of debt | 4.10% | 5.20% |
| After-tax WACC | 7.4% | 9.8% |
| Selected WACC | 8.6% | |
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 AAL.L:
cost_of_equity (11.85%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.01) + 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.