The WACC of Mears Group PLC (MER.L) is 7.5%.
| Range | Selected | |
| Cost of equity | 8.10% - 13.60% | 10.85% |
| Tax rate | 20.50% - 21.40% | 20.95% |
| Cost of debt | 4.20% - 5.20% | 4.70% |
| WACC | 5.9% - 9.1% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.69 | 1.24 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.10% | 13.60% |
| Tax rate | 20.50% | 21.40% |
| Debt/Equity ratio | 0.92 | 0.92 |
| Cost of debt | 4.20% | 5.20% |
| After-tax WACC | 5.9% | 9.1% |
| Selected WACC | 7.5% | |
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 MER.L:
cost_of_equity (10.85%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.69) + 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.