The WACC of Lookers PLC (LOOK.L) is 8.1%.
| Range | Selected | |
| Cost of equity | 10.80% - 14.80% | 12.80% |
| Tax rate | 18.30% - 26.10% | 22.20% |
| Cost of debt | 4.00% - 5.70% | 4.85% |
| WACC | 6.9% - 9.3% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.14 | 1.4 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.80% | 14.80% |
| Tax rate | 18.30% | 26.10% |
| Debt/Equity ratio | 1.09 | 1.09 |
| Cost of debt | 4.00% | 5.70% |
| After-tax WACC | 6.9% | 9.3% |
| 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 LOOK.L:
cost_of_equity (12.80%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.14) + 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.