HVN.AX WACC - Weighted Average Cost of Capital

The WACC of Harvey Norman Holdings Ltd (HVN.AX) is 6.6%.

The Cost of Equity of Harvey Norman Holdings Ltd (HVN.AX) is 7.60%.

The Cost of Debt of Harvey Norman Holdings Ltd (HVN.AX) is 5.50%.

	Range	Selected
Cost of equity	6.40% - 8.80%	7.60%
Tax rate	28.30% - 28.80%	28.55%
Cost of debt	4.00% - 7.00%	5.50%
WACC	5.5% - 7.8%	6.6%

WACC

HVN.AX WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.46	0.61

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.40%	8.80%

Tax rate	28.30%	28.80%
Debt/Equity ratio	0.35	0.35
Cost of debt	4.00%	7.00%

After-tax WACC	5.5%	7.8%


Selected WACC	6.6%

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 (0.46) + 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.