The WACC of Cannasouth Ltd (CBD.NZ) is 7.6%.
| Range | Selected | |
| Cost of equity | 6.60% - 9.90% | 8.25% |
| Tax rate | 28.00% - 28.00% | 28.00% |
| Cost of debt | 4.00% - 4.90% | 4.45% |
| WACC | 6.1% - 9.0% | 7.6% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.44 | 0.75 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.60% | 9.90% |
| Tax rate | 28.00% | 28.00% |
| Debt/Equity ratio | 0.15 | 0.15 |
| Cost of debt | 4.00% | 4.90% |
| After-tax WACC | 6.1% | 9.0% |
| Selected WACC | 7.6% | |
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 CBD.NZ:
cost_of_equity (8.25%) = risk_free_rate (4.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.44) + 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.