BAF.L WACC - Weighted Average Cost of Capital

The WACC of British and American Investment Trust PLC (BAF.L) is 6.9%.

The Cost of Equity of British and American Investment Trust PLC (BAF.L) is 7.80%.

The Cost of Debt of British and American Investment Trust PLC (BAF.L) is 4.45%.

	Range	Selected
Cost of equity	6.80% - 8.80%	7.80%
Tax rate	1.70% - 2.20%	1.95%
Cost of debt	4.30% - 4.60%	4.45%
WACC	6.1% - 7.7%	6.9%

WACC

BAF.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.46	0.54

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.80%	8.80%

Tax rate	1.70%	2.20%
Debt/Equity ratio	0.33	0.33
Cost of debt	4.30%	4.60%

After-tax WACC	6.1%	7.7%


Selected WACC	6.9%

BAF.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 BAF.L:

cost_of_equity (7.80%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.46) + 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.