DGE.L
Diageo PLC
Price:  
2,120.00 
GBP
Volume:  
3,001,210.00
United Kingdom | Beverages
Valuation
Overview
Financials
Forecast
Compare
Historical Price
SolvencyDividends
Transactions
People

DGE.L WACC - Weighted Average Cost of Capital

The WACC of Diageo PLC (DGE.L) is 7.6%.

The Cost of Equity of Diageo PLC (DGE.L) is 9.60%.
The Cost of Debt of Diageo PLC (DGE.L) is 4.60%.

Range Selected
Cost of equity 8.20% - 11.00% 9.60%
Tax rate 23.80% - 24.10% 23.95%
Cost of debt 4.00% - 5.20% 4.60%
WACC 6.5% - 8.8% 7.6%
WACC

DGE.L WACC calculation

Category Low High
Long-term bond rate 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.7 0.87
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.20% 11.00%
Tax rate 23.80% 24.10%
Debt/Equity ratio 0.47 0.47
Cost of debt 4.00% 5.20%
After-tax WACC 6.5% 8.8%
Selected WACC 7.6%

DGE.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 DGE.L:

cost_of_equity (9.60%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.7) + 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.