The WACC of HMS Hydraulic Machines & Systems Group PLC (HMSG.L) is 6.0%.
| Range | Selected | |
| Cost of equity | 6.90% - 13.90% | 10.40% |
| Tax rate | 34.90% - 49.50% | 42.20% |
| Cost of debt | 7.60% - 9.00% | 8.30% |
| WACC | 5.4% - 6.6% | 6.0% |
| Category | Low | High |
| Long-term bond rate | 1.7% | 2.2% |
| Equity market risk premium | 4.8% | 5.8% |
| Adjusted beta | 1.08 | 1.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 13.90% |
| Tax rate | 34.90% | 49.50% |
| Debt/Equity ratio | 3.57 | 3.57 |
| Cost of debt | 7.60% | 9.00% |
| After-tax WACC | 5.4% | 6.6% |
| Selected WACC | 6.0% | |
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 HMSG.L:
cost_of_equity (10.40%) = risk_free_rate (1.95%) + equity_risk_premium (5.30%) * adjusted_beta (1.08) + 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.