FCG.NZ WACC - Weighted Average Cost of Capital

The WACC of Fonterra Co-Operative Group Ltd (FCG.NZ) is 6.6%.

The Cost of Equity of Fonterra Co-Operative Group Ltd (FCG.NZ) is 7.50%.

The Cost of Debt of Fonterra Co-Operative Group Ltd (FCG.NZ) is 4.70%.

	Range	Selected
Cost of equity	6.70% - 8.30%	7.50%
Tax rate	16.90% - 18.30%	17.60%
Cost of debt	4.00% - 5.40%	4.70%
WACC	5.9% - 7.4%	6.6%

WACC

FCG.NZ WACC calculation

Category	Low	High

Long-term bond rate	4.3%	4.8%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.47	0.49

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.70%	8.30%

Tax rate	16.90%	18.30%
Debt/Equity ratio	0.32	0.32
Cost of debt	4.00%	5.40%

After-tax WACC	5.9%	7.4%


Selected WACC	6.6%

FCG.NZ'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 FCG.NZ:

cost_of_equity (7.50%) = risk_free_rate (4.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.47) + 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.