DFS.L WACC - Weighted Average Cost of Capital

The WACC of DFS Furniture PLC (DFS.L) is 7.9%.

The Cost of Equity of DFS Furniture PLC (DFS.L) is 9.00%.

The Cost of Debt of DFS Furniture PLC (DFS.L) is 9.25%.

	Range	Selected
Cost of equity	7.80% - 10.20%	9.00%
Tax rate	19.40% - 23.30%	21.35%
Cost of debt	6.00% - 12.50%	9.25%
WACC	5.9% - 9.8%	7.9%

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	0.64	0.75

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.80%	10.20%

Tax rate	19.40%	23.30%
Debt/Equity ratio	1.78	1.78
Cost of debt	6.00%	12.50%

After-tax WACC	5.9%	9.8%


Selected WACC	7.9%

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 (9.00%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.64) + 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.