The WACC of K2 Asset Management Holdings Ltd (KAM.AX) is 7.2%.
| Range | Selected | |
| Cost of equity | 6.30% - 8.00% | 7.15% |
| Tax rate | 7.40% - 22.60% | 15.00% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.3% - 8.0% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.45 | 0.49 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.30% | 8.00% |
| Tax rate | 7.40% | 22.60% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.3% | 8.0% |
| Selected WACC | 7.2% | |
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 KAM.AX:
cost_of_equity (7.15%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.45) + 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.