BA.L WACC - Weighted Average Cost of Capital

The WACC of BAE Systems PLC (BA.L) is 9.7%.

The Cost of Equity of BAE Systems PLC (BA.L) is 10.75%.

The Cost of Debt of BAE Systems PLC (BA.L) is 5.30%.

	Range	Selected
Cost of equity	9.60% - 11.90%	10.75%
Tax rate	13.50% - 14.80%	14.15%
Cost of debt	5.20% - 5.40%	5.30%
WACC	8.8% - 10.7%	9.7%

WACC

BA.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.95	0.98

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.60%	11.90%

Tax rate	13.50%	14.80%
Debt/Equity ratio	0.19	0.19
Cost of debt	5.20%	5.40%

After-tax WACC	8.8%	10.7%


Selected WACC	9.7%

BA.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 BA.L:

cost_of_equity (10.75%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.95) + 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.