EOS.AX WACC - Weighted Average Cost of Capital

The WACC of Electro Optic Systems Holdings Ltd (EOS.AX) is 8.5%.

The Cost of Equity of Electro Optic Systems Holdings Ltd (EOS.AX) is 9.05%.

The Cost of Debt of Electro Optic Systems Holdings Ltd (EOS.AX) is 6.65%.

	Range	Selected
Cost of equity	7.70% - 10.40%	9.05%
Tax rate	15.30% - 17.50%	16.40%
Cost of debt	4.00% - 9.30%	6.65%
WACC	7.0% - 9.9%	8.5%

WACC

EOS.AX WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.73	0.89

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.70%	10.40%

Tax rate	15.30%	17.50%
Debt/Equity ratio	0.21	0.21
Cost of debt	4.00%	9.30%

After-tax WACC	7.0%	9.9%


Selected WACC	8.5%

EOS.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 EOS.AX:

cost_of_equity (9.05%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.73) + 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.