The WACC of Arvida Group Ltd (ARV.NZ) is 12.5%.
| Range | Selected | |
| Cost of equity | 8.60% - 11.00% | 9.80% |
| Tax rate | 1.60% - 2.80% | 2.20% |
| Cost of debt | 4.00% - 24.30% | 14.15% |
| WACC | 5.5% - 19.4% | 12.5% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.85 | 0.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.60% | 11.00% |
| Tax rate | 1.60% | 2.80% |
| Debt/Equity ratio | 1.97 | 1.97 |
| Cost of debt | 4.00% | 24.30% |
| After-tax WACC | 5.5% | 19.4% |
| Selected WACC | 12.5% | |
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 ARV.NZ:
cost_of_equity (9.80%) = risk_free_rate (4.55%) + 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.