BATS.L WACC - Weighted Average Cost of Capital

The WACC of British American Tobacco PLC (BATS.L) is 6.3%.

The Cost of Equity of British American Tobacco PLC (BATS.L) is 7.20%.

The Cost of Debt of British American Tobacco PLC (BATS.L) is 4.70%.

	Range	Selected
Cost of equity	6.30% - 8.10%	7.20%
Tax rate	19.50% - 23.00%	21.25%
Cost of debt	4.20% - 5.20%	4.70%
WACC	5.6% - 7.0%	6.3%

WACC

BATS.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.39	0.45

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.30%	8.10%

Tax rate	19.50%	23.00%
Debt/Equity ratio	0.37	0.37
Cost of debt	4.20%	5.20%

After-tax WACC	5.6%	7.0%


Selected WACC	6.3%

BATS.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 BATS.L:

cost_of_equity (7.20%) = 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.