ESCT.L WACC - Weighted Average Cost of Capital

The WACC of European Smaller Companies Trust PLC (ESCT.L) is 13.6%.

The Cost of Equity of European Smaller Companies Trust PLC (ESCT.L) is 13.70%.

The Cost of Debt of European Smaller Companies Trust PLC (ESCT.L) is 4.30%.

	Range	Selected
Cost of equity	12.50% - 14.90%	13.70%
Tax rate	1.60% - 1.60%	1.60%
Cost of debt	4.00% - 4.60%	4.30%
WACC	12.4% - 14.8%	13.6%

WACC

ESCT.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	1.42	1.42

Additional risk adjustments	0.0%	0.5%
Cost of equity	12.50%	14.90%

Tax rate	1.60%	1.60%
Debt/Equity ratio	0.01	0.01
Cost of debt	4.00%	4.60%

After-tax WACC	12.4%	14.8%


Selected WACC	13.6%

ESCT.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 ESCT.L:

cost_of_equity (13.70%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.42) + 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.