The WACC of Abacus Property Group (ABP.AX) is 8.5%.
| Range | Selected | |
| Cost of equity | 10.40% - 12.90% | 11.65% |
| Tax rate | 3.70% - 4.80% | 4.25% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 7.2% - 9.8% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 4.1% | 4.6% |
| Equity market risk premium | 5.5% | 6.5% |
| Adjusted beta | 1.15 | 1.2 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.40% | 12.90% |
| Tax rate | 3.70% | 4.80% |
| Debt/Equity ratio | 0.96 | 0.96 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 7.2% | 9.8% |
| Selected WACC | 8.5% | |
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 ABP.AX:
cost_of_equity (11.65%) = risk_free_rate (4.35%) + equity_risk_premium (6.00%) * adjusted_beta (1.15) + 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.