CBA.AX WACC - Weighted Average Cost of Capital
The WACC of Commonwealth Bank of Australia (CBA.AX) is 6.6%.
| Range | Selected | |
| Cost of equity | 7.4% - 10.1% | 8.75% |
| Tax rate | 29.0% - 29.2% | 29.1% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.8% - 7.3% | 6.6% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.67 | 0.83 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.4% | 10.1% |
| Tax rate | 29.0% | 29.2% |
| Debt/Equity ratio | 0.72 | 0.72 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.8% | 7.3% |
| Selected WACC | 6.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| CBA.AX | Commonwealth Bank of Australia | 0.72 | 1.06 | 0.7 |
| 000001.SZ | Ping An Bank Co Ltd | 3.87 | 0.97 | 0.26 |
| 600016.SS | China Minsheng Banking Corp Ltd | 6.97 | 0.74 | 0.13 |
| 601916.SS | China Zheshang Bank Co Ltd | 7.06 | 0.72 | 0.12 |
| 8306.T | Mitsubishi UFJ Financial Group Inc | 4.07 | 1.5 | 0.38 |
| ANZ.AX | Australia and New Zealand Banking Group Ltd | 2.43 | 1.37 | 0.5 |
| HDFCBANK.NS | HDFC Bank Ltd | 0.41 | 0.14 | 0.1 |
| NAB.AX | National Australia Bank Ltd | 2.32 | 1.28 | 0.48 |
| SBER.ME | Sberbank Rossii PAO | 0.19 | 0.71 | 0.63 |
| WBC.AX | Westpac Banking Corp | 2.03 | 1.32 | 0.54 |
| Low | High | |
| Unlevered beta | 0.33 | 0.49 |
| Relevered beta | 0.51 | 0.75 |
| Adjusted relevered beta | 0.67 | 0.83 |
CBA.AX'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 CBA.AX:
cost_of_equity (8.75%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.67) + 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.