The WACC of Schroder Asian Total Return Investment Company PLC (ATR.L) is 9.3%.
| Range | Selected | |
| Cost of equity | 12.50% - 15.30% | 13.90% |
| Tax rate | 3.00% - 3.50% | 3.25% |
| Cost of debt | 4.60% - 4.90% | 4.75% |
| WACC | 8.5% - 10.0% | 9.3% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.43 | 1.47 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.50% | 15.30% |
| Tax rate | 3.00% | 3.50% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 4.60% | 4.90% |
| After-tax WACC | 8.5% | 10.0% |
| Selected WACC | 9.3% | |
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 ATR.L:
cost_of_equity (13.90%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.43) + 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.