The WACC of Dixons Carphone PLC (DC.L) is 7.0%.
| Range | Selected | |
| Cost of equity | 7.60% - 10.40% | 9.00% |
| Tax rate | 19.40% - 21.70% | 20.55% |
| Cost of debt | 6.10% - 7.00% | 6.55% |
| WACC | 6.2% - 7.8% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 0.88 | 1.03 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.60% | 10.40% |
| Tax rate | 19.40% | 21.70% |
| Debt/Equity ratio | 1.12 | 1.12 |
| Cost of debt | 6.10% | 7.00% |
| After-tax WACC | 6.2% | 7.8% |
| Selected WACC | 7.0% | |
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 DC.L:
cost_of_equity (9.00%) = risk_free_rate (3.15%) + equity_risk_premium (5.80%) * adjusted_beta (0.88) + 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.