The WACC of Henderson High Income Trust PLC (HHI.L) is 10.0%.
| Range | Selected | |
| Cost of equity | 9.60% - 12.90% | 11.25% |
| Tax rate | 0.60% - 0.70% | 0.65% |
| Cost of debt | 4.30% - 5.10% | 4.70% |
| WACC | 8.6% - 11.4% | 10.0% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.93 | 1.13 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.60% | 12.90% |
| Tax rate | 0.60% | 0.70% |
| Debt/Equity ratio | 0.23 | 0.23 |
| Cost of debt | 4.30% | 5.10% |
| After-tax WACC | 8.6% | 11.4% |
| Selected WACC | 10.0% | |
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 HHI.L:
cost_of_equity (11.25%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.93) + 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.