DFS.L WACC - Weighted Average Cost of Capital

The WACC of DFS Furniture PLC (DFS.L) is 8.8%.

The Cost of Equity of DFS Furniture PLC (DFS.L) is 13.50%.

The Cost of Debt of DFS Furniture PLC (DFS.L) is 7.05%.

	Range	Selected
Cost of equity	10.40% - 16.60%	13.50%
Tax rate	23.70% - 25.20%	24.45%
Cost of debt	6.50% - 7.60%	7.05%
WACC	7.3% - 10.3%	8.8%

WACC

DFS.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	1.07	1.66

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.40%	16.60%

Tax rate	23.70%	25.20%
Debt/Equity ratio	1.37	1.37
Cost of debt	6.50%	7.60%

After-tax WACC	7.3%	10.3%


Selected WACC	8.8%

DFS.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 DFS.L:

cost_of_equity (13.50%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.07) + 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.