AIR.NZ WACC - Weighted Average Cost of Capital

The WACC of Air New Zealand Ltd (AIR.NZ) is 9.3%.

The Cost of Equity of Air New Zealand Ltd (AIR.NZ) is 8.35%.

The Cost of Debt of Air New Zealand Ltd (AIR.NZ) is 14.15%.

	Range	Selected
Cost of equity	6.30% - 10.40%	8.35%
Tax rate	29.10% - 31.10%	30.10%
Cost of debt	4.00% - 24.30%	14.15%
WACC	4.0% - 14.7%	9.3%

WACC

AIR.NZ WACC calculation

Category	Low	High

Long-term bond rate	4.3%	4.8%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.38	0.83

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.30%	10.40%

Tax rate	29.10%	31.10%
Debt/Equity ratio	2.07	2.07
Cost of debt	4.00%	24.30%

After-tax WACC	4.0%	14.7%


Selected WACC	9.3%

AIR.NZ'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 AIR.NZ:

cost_of_equity (8.35%) = risk_free_rate (4.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.38) + 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.