DOW.AX WACC - Weighted Average Cost of Capital
The WACC of Downer EDI Ltd (DOW.AX) is 6.9%.
| Range | Selected | |
| Cost of equity | 6.4% - 9.2% | 7.8% |
| Tax rate | 12.0% - 15.8% | 13.9% |
| Cost of debt | 4.0% - 7.0% | 5.5% |
| WACC | 5.5% - 8.2% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.46 | 0.69 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.4% | 9.2% |
| Tax rate | 12.0% | 15.8% |
| Debt/Equity ratio | 0.42 | 0.42 |
| Cost of debt | 4.0% | 7.0% |
| After-tax WACC | 5.5% | 8.2% |
| Selected WACC | 6.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| DOW.AX | Downer EDI Ltd | 0.42 | 0.49 | 0.36 |
| 002989.SZ | Shenzhen Strongteam Decoration Engineering Co Ltd | 0.06 | 0.94 | 0.89 |
| 5IF.SI | Natural Cool Holdings Ltd | 4.91 | -0.49 | -0.09 |
| 6139.TW | L & K Engineering Co Ltd | 0.03 | 1.14 | 1.12 |
| 8140.HK | Bosa Technology Holdings Ltd | 0.05 | -0.04 | -0.04 |
| 9788.T | Nac Co Ltd | 0.28 | 0.55 | 0.44 |
| AMA.AX | AMA Group Ltd | 1.04 | 1.52 | 0.8 |
| BXB.AX | Brambles Ltd | 0.13 | 0.2 | 0.18 |
| MIL.AX | Millennium Services Group Ltd | 0.18 | 0.09 | 0.07 |
| NAM.AX | Namoi Cotton Ltd | 0.2 | 0.09 | 0.08 |
| Low | High | |
| Unlevered beta | 0.14 | 0.39 |
| Relevered beta | 0.19 | 0.54 |
| Adjusted relevered beta | 0.46 | 0.69 |
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.