The WACC of Finexia Financial Group Ltd (FNX.AX) is 10.8%.
| Range | Selected | |
| Cost of equity | 5.90% - 9.30% | 7.60% |
| Tax rate | 15.30% - 19.70% | 17.50% |
| Cost of debt | 4.00% - 24.00% | 14.00% |
| WACC | 3.8% - 17.7% | 10.8% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.37 | 0.7 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.90% | 9.30% |
| Tax rate | 15.30% | 19.70% |
| Debt/Equity ratio | 5.41 | 5.41 |
| Cost of debt | 4.00% | 24.00% |
| After-tax WACC | 3.8% | 17.7% |
| Selected WACC | 10.8% | |
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 FNX.AX:
cost_of_equity (7.60%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.37) + 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.