The WACC of AMP Ltd (AMP.AX) is 3.9%.
| Range | Selected | |
| Cost of equity | 8.30% - 15.70% | 12.00% |
| Tax rate | 32.60% - 45.60% | 39.10% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.9% - 4.0% | 3.9% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.85 | 1.75 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.30% | 15.70% |
| Tax rate | 32.60% | 45.60% |
| Debt/Equity ratio | 8.97 | 8.97 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.9% | 4.0% |
| Selected WACC | 3.9% | |
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 AMP.AX:
cost_of_equity (12.00%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.85) + 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.