The WACC of New Energy Solar Ltd (NEW.AX) is 7.9%.
| Range | Selected | |
| Cost of equity | 9.20% - 12.60% | 10.90% |
| Tax rate | 2.50% - 3.00% | 2.75% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.0% - 8.7% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.02 | 1.24 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.20% | 12.60% |
| Tax rate | 2.50% | 3.00% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.0% | 8.7% |
| Selected WACC | 7.9% | |
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 NEW.AX:
cost_of_equity (10.90%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (1.02) + 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.