LIT.L WACC - Weighted Average Cost of Capital

The WACC of Litigation Capital Management Ltd (LIT.L) is 10.0%.

The Cost of Equity of Litigation Capital Management Ltd (LIT.L) is 9.15%.

The Cost of Debt of Litigation Capital Management Ltd (LIT.L) is 15.80%.

	Range	Selected
Cost of equity	7.80% - 10.50%	9.15%
Tax rate	25.50% - 28.40%	26.95%
Cost of debt	15.80% - 15.80%	15.80%
WACC	9.2% - 10.8%	10.0%

WACC

LIT.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.64	0.79

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.80%	10.50%

Tax rate	25.50%	28.40%
Debt/Equity ratio	0.55	0.55
Cost of debt	15.80%	15.80%

After-tax WACC	9.2%	10.8%


Selected WACC	10.0%

LIT.L's CAPM model and how its cost of Equity is calculated

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 LIT.L:

cost_of_equity (9.15%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.64) + 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.