The WACC of Lekoil Ltd (LEK.L) is 9.8%.
| Range | Selected | |
| Cost of equity | 9.80% - 13.10% | 11.45% |
| Tax rate | 19.00% - 19.00% | 19.00% |
| Cost of debt | 7.00% - 15.40% | 11.20% |
| WACC | 6.9% - 12.7% | 9.8% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 1.28 | 1.45 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.80% | 13.10% |
| Tax rate | 19.00% | 19.00% |
| Debt/Equity ratio | 2.28 | 2.28 |
| Cost of debt | 7.00% | 15.40% |
| After-tax WACC | 6.9% | 12.7% |
| Selected WACC | 9.8% | |
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 LEK.L:
cost_of_equity (11.45%) = risk_free_rate (3.15%) + equity_risk_premium (5.80%) * adjusted_beta (1.28) + 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.