FMG.AX
Fortescue Metals Group Ltd
Price:  
16.35 
AUD
Volume:  
5,257,386.00
Australia | Metals & Mining
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FMG.AX WACC - Weighted Average Cost of Capital

The WACC of Fortescue Metals Group Ltd (FMG.AX) is 9.4%.

The Cost of Equity of Fortescue Metals Group Ltd (FMG.AX) is 10.25%.
The Cost of Debt of Fortescue Metals Group Ltd (FMG.AX) is 5.50%.

Range Selected
Cost of equity 8.50% - 12.00% 10.25%
Tax rate 30.00% - 30.20% 30.10%
Cost of debt 4.00% - 7.00% 5.50%
WACC 7.7% - 11.0% 9.4%
WACC

FMG.AX WACC calculation

Category Low High
Long-term bond rate 4.0% 4.5%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.89 1.15
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.50% 12.00%
Tax rate 30.00% 30.20%
Debt/Equity ratio 0.17 0.17
Cost of debt 4.00% 7.00%
After-tax WACC 7.7% 11.0%
Selected WACC 9.4%

FMG.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 FMG.AX:

cost_of_equity (10.25%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.89) + 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.