ABF.L WACC - Weighted Average Cost of Capital

The WACC of Associated British Foods PLC (ABF.L) is 7.1%.

The Cost of Equity of Associated British Foods PLC (ABF.L) is 8.15%.

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

	Range	Selected
Cost of equity	7.30% - 9.00%	8.15%
Tax rate	27.90% - 31.70%	29.80%
Cost of debt	4.00% - 4.70%	4.35%
WACC	6.4% - 7.8%	7.1%

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	0.56	0.57

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.30%	9.00%

Tax rate	27.90%	31.70%
Debt/Equity ratio	0.25	0.25
Cost of debt	4.00%	4.70%

After-tax WACC	6.4%	7.8%


Selected WACC	7.1%

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 (8.15%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.56) + 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.