MRCH.L WACC - Weighted Average Cost of Capital

The WACC of Merchants Trust PLC (MRCH.L) is 10.5%.

The Cost of Equity of Merchants Trust PLC (MRCH.L) is 11.35%.

The Cost of Debt of Merchants Trust PLC (MRCH.L) is 4.50%.

	Range	Selected
Cost of equity	9.90% - 12.80%	11.35%
Tax rate	0.40% - 0.90%	0.65%
Cost of debt	4.40% - 4.60%	4.50%
WACC	9.3% - 11.8%	10.5%

WACC

MRCH.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	1	1.12

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.90%	12.80%

Tax rate	0.40%	0.90%
Debt/Equity ratio	0.14	0.14
Cost of debt	4.40%	4.60%

After-tax WACC	9.3%	11.8%


Selected WACC	10.5%

MRCH.L's CAPM model and how its cost of Equity is calculated

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 MRCH.L:

cost_of_equity (11.35%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1) + 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.