The WACC of Lubawa SA (LBW.WA) is 11.3%.
Range | Selected | |
Cost of equity | 10.20% - 12.50% | 11.35% |
Tax rate | 18.20% - 18.60% | 18.40% |
Cost of debt | 6.10% - 6.10% | 6.10% |
WACC | 10.2% - 12.4% | 11.3% |
Category | Low | High |
Long-term bond rate | 5.5% | 6.0% |
Equity market risk premium | 6.3% | 7.3% |
Adjusted beta | 0.75 | 0.82 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 10.20% | 12.50% |
Tax rate | 18.20% | 18.60% |
Debt/Equity ratio | 0.01 | 0.01 |
Cost of debt | 6.10% | 6.10% |
After-tax WACC | 10.2% | 12.4% |
Selected WACC | 11.3% | |
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 LBW.WA:
cost_of_equity (11.35%) = risk_free_rate (5.75%) + equity_risk_premium (6.80%) * adjusted_beta (0.75) + 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.