The WACC of Asaleo Care Ltd (AHY.AX) is 8.9%.
| Range | Selected | |
| Cost of equity | 8.90% - 11.10% | 10.00% |
| Tax rate | 29.20% - 29.30% | 29.25% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 7.8% - 9.9% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 1.11 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.90% | 11.10% |
| Tax rate | 29.20% | 29.30% |
| Debt/Equity ratio | 0.23 | 0.23 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 7.8% | 9.9% |
| Selected WACC | 8.9% | |
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 AHY.AX:
cost_of_equity (10.00%) = risk_free_rate (3.95%) + equity_risk_premium (5.20%) * adjusted_beta (1.11) + 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.