The WACC of National Tyre & Wheel Ltd (NTD.AX) is 6.1%.
| Range | Selected | |
| Cost of equity | 16.70% - 23.30% | 20.00% |
| Tax rate | 30.90% - 33.00% | 31.95% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 4.8% - 7.4% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 2.49 | 3 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 16.70% | 23.30% |
| Tax rate | 30.90% | 33.00% |
| Debt/Equity ratio | 5.88 | 5.88 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 4.8% | 7.4% |
| Selected WACC | 6.1% | |
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 NTD.AX:
cost_of_equity (20.00%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (2.49) + 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.