The WACC of Mainstream Group Holdings Ltd (MAI.AX) is 9.7%.
| Range | Selected | |
| Cost of equity | 8.50% - 11.30% | 9.90% |
| Tax rate | 29.00% - 46.60% | 37.80% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.4% - 11.0% | 9.7% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 1.03 | 1.16 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.50% | 11.30% |
| Tax rate | 29.00% | 46.60% |
| Debt/Equity ratio | 0.03 | 0.03 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.4% | 11.0% |
| Selected WACC | 9.7% | |
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 MAI.AX:
cost_of_equity (9.90%) = risk_free_rate (3.95%) + equity_risk_premium (5.20%) * adjusted_beta (1.03) + 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.