The WACC of Heron Resources Ltd (HRR.AX) is 6.6%.
| Range | Selected | |
| Cost of equity | 30.00% - 43.90% | 36.95% |
| Tax rate | 30.00% - 30.00% | 30.00% |
| Cost of debt | 4.40% - 4.50% | 4.45% |
| WACC | 5.9% - 7.4% | 6.6% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 5.55 | 6.84 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 30.00% | 43.90% |
| Tax rate | 30.00% | 30.00% |
| Debt/Equity ratio | 8.6 | 8.6 |
| Cost of debt | 4.40% | 4.50% |
| After-tax WACC | 5.9% | 7.4% |
| Selected WACC | 6.6% | |
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 HRR.AX:
cost_of_equity (36.95%) = risk_free_rate (3.95%) + equity_risk_premium (5.20%) * adjusted_beta (5.55) + 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.