The WACC of LumiraDx Ltd (LMDX) is 4.8%.
| Range | Selected | |
| Cost of equity | 4.90% - 8.20% | 6.55% |
| Tax rate | 3.50% - 5.00% | 4.25% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.8% - 4.8% | 4.8% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | -0.05 | 0.33 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 4.90% | 8.20% |
| Tax rate | 3.50% | 5.00% |
| Debt/Equity ratio | 68.76 | 68.76 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.8% | 4.8% |
| Selected WACC | 4.8% | |
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 LMDX:
cost_of_equity (6.55%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (-0.05) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.