The WACC of Ferro-Alloy Resources Ltd (FAR.L) is 7.1%.
| Range | Selected | |
| Cost of equity | 5.30% - 8.90% | 7.10% |
| Tax rate | 19.00% - 19.00% | 19.00% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 5.3% - 8.8% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.05 | 0.42 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 5.30% | 8.90% |
| Tax rate | 19.00% | 19.00% |
| Debt/Equity ratio | 0.03 | 0.03 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 5.3% | 8.8% |
| Selected WACC | 7.1% | |
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 FAR.L:
cost_of_equity (7.10%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.05) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.