The WACC of Master Pharm SA (MPH.WA) is 9.0%.
| Range | Selected | |
| Cost of equity | 7.90% - 10.40% | 9.15% |
| Tax rate | 19.50% - 20.80% | 20.15% |
| Cost of debt | 5.50% - 9.10% | 7.30% |
| WACC | 7.7% - 10.2% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 5.5% | 6.0% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.37 | 0.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.90% | 10.40% |
| Tax rate | 19.50% | 20.80% |
| Debt/Equity ratio | 0.05 | 0.05 |
| Cost of debt | 5.50% | 9.10% |
| After-tax WACC | 7.7% | 10.2% |
| Selected WACC | 9.0% | |
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 MPH.WA:
cost_of_equity (9.15%) = 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.