The WACC of Bmo Global Smaller Companies PLC (BGSC.L) is 9.7%.
| Range | Selected | |
| Cost of equity | 8.50% - 11.40% | 9.95% |
| Tax rate | 0.60% - 0.80% | 0.70% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.4% - 11.1% | 9.7% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 1.05 | 1.18 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.50% | 11.40% |
| Tax rate | 0.60% | 0.80% |
| Debt/Equity ratio | 0.06 | 0.06 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.4% | 11.1% |
| Selected WACC | 9.7% | |
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 BGSC.L:
cost_of_equity (9.95%) = risk_free_rate (3.15%) + equity_risk_premium (5.80%) * adjusted_beta (1.05) + 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.