The WACC of Freedom Foods Group Ltd (FNP.AX) is 11.2%.
| Range | Selected | |
| Cost of equity | 17.40% - 26.10% | 21.75% |
| Tax rate | 0.40% - 5.60% | 3.00% |
| Cost of debt | 9.60% - 9.60% | 9.60% |
| WACC | 10.8% - 11.7% | 11.2% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 2.89 | 3.73 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 17.40% | 26.10% |
| Tax rate | 0.40% | 5.60% |
| Debt/Equity ratio | 5.56 | 5.56 |
| Cost of debt | 9.60% | 9.60% |
| After-tax WACC | 10.8% | 11.7% |
| Selected WACC | 11.2% | |
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 FNP.AX:
cost_of_equity (21.75%) = risk_free_rate (3.95%) + equity_risk_premium (5.20%) * adjusted_beta (2.89) + 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.