AO.L WACC - Weighted Average Cost of Capital

The WACC of AO World PLC (AO.L) is 7.3%.

The Cost of Equity of AO World PLC (AO.L) is 7.60%.

The Cost of Debt of AO World PLC (AO.L) is 5.85%.

	Range	Selected
Cost of equity	6.40% - 8.80%	7.60%
Tax rate	23.10% - 38.00%	30.55%
Cost of debt	4.90% - 6.80%	5.85%
WACC	6.1% - 8.4%	7.3%

WACC

AO.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.4	0.55

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.40%	8.80%

Tax rate	23.10%	38.00%
Debt/Equity ratio	0.11	0.11
Cost of debt	4.90%	6.80%

After-tax WACC	6.1%	8.4%


Selected WACC	7.3%

AO.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 AO.L:

cost_of_equity (7.60%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.4) + 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.