DRX.L WACC - Weighted Average Cost of Capital

The WACC of Drax Group PLC (DRX.L) is 7.8%.

The Cost of Equity of Drax Group PLC (DRX.L) is 10.00%.

The Cost of Debt of Drax Group PLC (DRX.L) is 5.50%.

	Range	Selected
Cost of equity	8.50% - 11.50%	10.00%
Tax rate	24.60% - 29.80%	27.20%
Cost of debt	4.90% - 6.10%	5.50%
WACC	6.7% - 8.8%	7.8%

WACC

DRX.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.75	0.93

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.50%	11.50%

Tax rate	24.60%	29.80%
Debt/Equity ratio	0.59	0.59
Cost of debt	4.90%	6.10%

After-tax WACC	6.7%	8.8%


Selected WACC	7.8%

DRX.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 DRX.L:

cost_of_equity (10.00%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.75) + 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.