The WACC of CQS New City High Yield Fund Ltd (NCYF.L) is 10.8%.
| Range | Selected | |
| Cost of equity | 10.10% - 12.80% | 11.45% |
| Tax rate | 0.70% - 3.90% | 2.30% |
| Cost of debt | 4.90% - 4.90% | 4.90% |
| WACC | 9.6% - 11.9% | 10.8% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.03 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.10% | 12.80% |
| Tax rate | 0.70% | 3.90% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 4.90% | 4.90% |
| After-tax WACC | 9.6% | 11.9% |
| Selected WACC | 10.8% | |
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 NCYF.L:
cost_of_equity (11.45%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.03) + 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.