The WACC of Larq SA (LRQ.WA) is 7.1%.
| Range | Selected | |
| Cost of equity | 7.80% - 9.70% | 8.75% |
| Tax rate | 17.50% - 20.00% | 18.75% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.6% - 7.7% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 5.5% | 6.0% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.37 | 0.44 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.80% | 9.70% |
| Tax rate | 17.50% | 20.00% |
| Debt/Equity ratio | 0.53 | 0.53 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.6% | 7.7% |
| Selected WACC | 7.1% | |
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 LRQ.WA:
cost_of_equity (8.75%) = risk_free_rate (5.75%) + equity_risk_premium (6.80%) * adjusted_beta (0.37) + 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.