The WACC of Alliance Pharma PLC (APH.L) is 6.5%.
| Range | Selected | |
| Cost of equity | 6.30% - 8.20% | 7.25% |
| Tax rate | 29.60% - 34.60% | 32.10% |
| Cost of debt | 5.10% - 6.20% | 5.65% |
| WACC | 5.8% - 7.3% | 6.5% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.39 | 0.46 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.30% | 8.20% |
| Tax rate | 29.60% | 34.60% |
| Debt/Equity ratio | 0.27 | 0.27 |
| Cost of debt | 5.10% | 6.20% |
| After-tax WACC | 5.8% | 7.3% |
| Selected WACC | 6.5% | |
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 APH.L:
cost_of_equity (7.25%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.39) + 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.