The WACC of Exopharm Ltd (EX1.AX) is 4.9%.
| Range | Selected | |
| Cost of equity | 3.20% - 7.60% | 5.40% |
| Tax rate | 30.00% - 30.00% | 30.00% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.3% - 6.5% | 4.9% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | -0.44 | 0.18 |
| Additional risk adjustments | 1.5% | 2.0% |
| Cost of equity | 3.20% | 7.60% |
| Tax rate | 30.00% | 30.00% |
| Debt/Equity ratio | 0.36 | 0.36 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.3% | 6.5% |
| Selected WACC | 4.9% | |
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 EX1.AX:
cost_of_equity (5.40%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (-0.44) + risk_adjustments (1.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.