The WACC of Milkiland NV (MLK.WA) is 6.1%.
| Range | Selected | |
| Cost of equity | 11.00% - 14.10% | 12.55% |
| Tax rate | 1.00% - 1.60% | 1.30% |
| Cost of debt | 4.00% - 6.10% | 5.05% |
| WACC | 5.0% - 7.2% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 5.5% | 6.0% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.87 | 1.03 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.00% | 14.10% |
| Tax rate | 1.00% | 1.60% |
| Debt/Equity ratio | 6 | 6 |
| Cost of debt | 4.00% | 6.10% |
| After-tax WACC | 5.0% | 7.2% |
| Selected WACC | 6.1% | |
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 MLK.WA:
cost_of_equity (12.55%) = risk_free_rate (5.75%) + equity_risk_premium (6.80%) * adjusted_beta (0.87) + 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.