The WACC of Johnson Matthey PLC (JMAT.L) is 9.5%.
| Range | Selected | |
| Cost of equity | 10.20% - 13.20% | 11.70% |
| Tax rate | 20.50% - 27.60% | 24.05% |
| Cost of debt | 7.60% - 8.70% | 8.15% |
| WACC | 8.5% - 10.4% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.04 | 1.17 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.20% | 13.20% |
| Tax rate | 20.50% | 27.60% |
| Debt/Equity ratio | 0.68 | 0.68 |
| Cost of debt | 7.60% | 8.70% |
| After-tax WACC | 8.5% | 10.4% |
| Selected WACC | 9.5% | |
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 JMAT.L:
cost_of_equity (11.70%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.04) + 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.