The WACC of Honeycomb Investment Trust PLC (HONY.L) is 9.5%.
| Range | Selected | |
| Cost of equity | 10.90% - 14.60% | 12.75% |
| Tax rate | 19.00% - 19.00% | 19.00% |
| Cost of debt | 4.50% - 8.20% | 6.35% |
| WACC | 7.8% - 11.2% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 4.4% | 4.9% |
| Equity market risk premium | 6.4% | 7.4% |
| Adjusted beta | 1.01 | 1.24 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.90% | 14.60% |
| Tax rate | 19.00% | 19.00% |
| Debt/Equity ratio | 0.75 | 0.75 |
| Cost of debt | 4.50% | 8.20% |
| After-tax WACC | 7.8% | 11.2% |
| Selected WACC | 9.5% | |
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 HONY.L:
cost_of_equity (12.75%) = risk_free_rate (4.65%) + equity_risk_premium (6.90%) * adjusted_beta (1.01) + 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.