The WACC of G4S PLC (GFS.L) is 6.1%.
| Range | Selected | |
| Cost of equity | 7.00% - 9.60% | 8.30% |
| Tax rate | 34.50% - 48.90% | 41.70% |
| Cost of debt | 5.30% - 5.70% | 5.50% |
| WACC | 5.5% - 6.7% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 0.77 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.00% | 9.60% |
| Tax rate | 34.50% | 48.90% |
| Debt/Equity ratio | 0.77 | 0.77 |
| Cost of debt | 5.30% | 5.70% |
| After-tax WACC | 5.5% | 6.7% |
| Selected WACC | 6.1% | |
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 GFS.L:
cost_of_equity (8.30%) = risk_free_rate (3.15%) + equity_risk_premium (5.80%) * adjusted_beta (0.77) + 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.