The WACC of Narf Industries PLC (NARF.L) is 2.7%.
| Range | Selected | |
| Cost of equity | 1.60% - 3.40% | 2.50% |
| Tax rate | 19.00% - 19.00% | 19.00% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.4% - 1.9% | 2.7% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | -2.78 | -2.78 |
| Additional risk adjustments | 16.0% | 16.5% |
| Cost of equity | 1.60% | 3.40% |
| Tax rate | 19.00% | 19.00% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.4% | 1.9% |
| Selected WACC | 2.7% | |
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 NARF.L:
cost_of_equity (2.50%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (-2.78) + risk_adjustments (16.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.