The WACC of Kathmandu Holdings Ltd (KMD.NZ) is 8.1%.
| Range | Selected | |
| Cost of equity | 9.40% - 16.00% | 12.70% |
| Tax rate | 18.60% - 27.10% | 22.85% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 7.1% - 9.2% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.99 | 1.74 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.40% | 16.00% |
| Tax rate | 18.60% | 27.10% |
| Debt/Equity ratio | 1.68 | 1.68 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 7.1% | 9.2% |
| Selected WACC | 8.1% | |
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 KMD.NZ:
cost_of_equity (12.70%) = risk_free_rate (4.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.99) + 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.