HVN.AX WACC - Weighted Average Cost of Capital
The WACC of Harvey Norman Holdings Ltd (HVN.AX) is 6.7%.
| Range | Selected | |
| Cost of equity | 6.4% - 8.8% | 7.6% |
| Tax rate | 28.3% - 28.8% | 28.55% |
| Cost of debt | 4.0% - 7.0% | 5.5% |
| WACC | 5.5% - 7.8% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.47 | 0.61 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.4% | 8.8% |
| Tax rate | 28.3% | 28.8% |
| Debt/Equity ratio | 0.33 | 0.33 |
| Cost of debt | 4.0% | 7.0% |
| After-tax WACC | 5.5% | 7.8% |
| Selected WACC | 6.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HVN.AX | Harvey Norman Holdings Ltd | 0.33 | 1.03 | 0.83 |
| 2782.T | Seria Co Ltd | 0.01 | -0.16 | -0.16 |
| 600697.SS | Chang Chun Eurasia Group Co Ltd | 4.99 | 0.62 | 0.14 |
| 600858.SS | Inzone Group Co Ltd | 1.89 | 0.96 | 0.41 |
| 600859.SS | Wangfujing Group Co Ltd | 0.74 | 1.48 | 0.96 |
| 8278.T | Fuji Co Ltd | 0.4 | 0.24 | 0.19 |
| FRETAIL.NS | Future Retail Ltd | 106 | 1.27 | 0.02 |
| TRS.AX | Reject Shop Ltd | 0.95 | 0.19 | 0.11 |
| WES.AX | Wesfarmers Ltd | 0.12 | 1.22 | 1.12 |
| WHS.NZ | Warehouse Group Ltd | 3.13 | 0.94 | 0.29 |
| Low | High | |
| Unlevered beta | 0.17 | 0.34 |
| Relevered beta | 0.21 | 0.42 |
| Adjusted relevered beta | 0.47 | 0.61 |
HVN.AX'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 HVN.AX:
cost_of_equity (7.60%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.47) + 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.