The WACC of Micro Focus International PLC (MCRO.L) is 12.1%.
| Range | Selected | |
| Cost of equity | 9.40% - 13.80% | 11.60% |
| Tax rate | 15.50% - 32.00% | 23.75% |
| Cost of debt | 10.10% - 24.00% | 17.05% |
| WACC | 8.8% - 15.5% | 12.1% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.91 | 1.26 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.40% | 13.80% |
| Tax rate | 15.50% | 32.00% |
| Debt/Equity ratio | 1.96 | 1.96 |
| Cost of debt | 10.10% | 24.00% |
| After-tax WACC | 8.8% | 15.5% |
| Selected WACC | 12.1% | |
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 MCRO.L:
cost_of_equity (11.60%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.91) + 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.