The WACC of Independent Oil and Gas PLC (IOG.L) is 8.9%.
| Range | Selected | |
| Cost of equity | 68.30% - 101.40% | 84.85% |
| Tax rate | 19.00% - 19.00% | 19.00% |
| Cost of debt | 5.20% - 8.40% | 6.80% |
| WACC | 6.9% - 10.8% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 10.76 | 13.81 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 68.30% | 101.40% |
| Tax rate | 19.00% | 19.00% |
| Debt/Equity ratio | 22.72 | 22.72 |
| Cost of debt | 5.20% | 8.40% |
| After-tax WACC | 6.9% | 10.8% |
| Selected WACC | 8.9% | |
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 IOG.L:
cost_of_equity (84.85%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (10.76) + 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.