The WACC of JPmorgan Smaller Companies Investment Trust PLC (JMI.L) is 10.0%.
| Range | Selected | |
| Cost of equity | 9.00% - 12.10% | 10.55% |
| Tax rate | 0.20% - 0.30% | 0.25% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 8.5% - 11.6% | 10.0% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.88 | 1.06 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.00% | 12.10% |
| Tax rate | 0.20% | 0.30% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 8.5% | 11.6% |
| Selected WACC | 10.0% | |
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 JMI.L:
cost_of_equity (10.55%) = risk_free_rate (3.95%) + equity_risk_premium (6.50%) * adjusted_beta (0.88) + 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.