HQL WACC - Weighted Average Cost of Capital
The WACC of Tekla Life Sciences Investors (HQL) is 6.8%.
| Range | Selected | |
| Cost of equity | 8.9% - 11.1% | 10% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.3% - 7.4% | 6.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.1 | 1.1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.9% | 11.1% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.3% | 7.4% |
| Selected WACC | 6.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HQL | Tekla Life Sciences Investors | 1.01 | 3.55 | 2.04 |
| Low | High | |
| Unlevered beta | 2.04 | 2.04 |
| Relevered beta | 1.15 | 1.15 |
| Adjusted relevered beta | 1.1 | 1.1 |
HQL's CAPM model and how its cost of Equity is calculated
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 HQL:
cost_of_equity (10.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.1) + 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.