ABF.L WACC - Weighted Average Cost of Capital

The WACC of Associated British Foods PLC (ABF.L) is 6.8%.

The Cost of Equity of Associated British Foods PLC (ABF.L) is 7.80%.

The Cost of Debt of Associated British Foods PLC (ABF.L) is 4.35%.

	Range	Selected
Cost of equity	6.90% - 8.70%	7.80%
Tax rate	24.70% - 28.20%	26.45%
Cost of debt	4.00% - 4.70%	4.35%
WACC	6.1% - 7.6%	6.8%

WACC

ABF.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.48	0.53

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.90%	8.70%

Tax rate	24.70%	28.20%
Debt/Equity ratio	0.26	0.26
Cost of debt	4.00%	4.70%

After-tax WACC	6.1%	7.6%


Selected WACC	6.8%

ABF.L's CAPM model and how its cost of Equity is calculated

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 ABF.L:

cost_of_equity (7.80%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.48) + 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.