DOW.AX WACC - Weighted Average Cost of Capital

The WACC of Downer EDI Ltd (DOW.AX) is 6.8%.

The Cost of Equity of Downer EDI Ltd (DOW.AX) is 7.80%.

The Cost of Debt of Downer EDI Ltd (DOW.AX) is 5.50%.

	Range	Selected
Cost of equity	6.40% - 9.20%	7.80%
Tax rate	12.00% - 15.80%	13.90%
Cost of debt	4.00% - 7.00%	5.50%
WACC	5.5% - 8.2%	6.8%

WACC

DOW.AX WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.46	0.68

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.40%	9.20%

Tax rate	12.00%	15.80%
Debt/Equity ratio	0.44	0.44
Cost of debt	4.00%	7.00%

After-tax WACC	5.5%	8.2%


Selected WACC	6.8%

DOW.AX'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 DOW.AX:

cost_of_equity (7.80%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.46) + 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.