The WACC of 1300 Smiles Ltd (ONT.AX) is 8.7%.
| Range | Selected | |
| Cost of equity | 7.60% - 10.80% | 9.20% |
| Tax rate | 27.60% - 28.20% | 27.90% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 7.3% - 10.2% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 0.82 | 1.08 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.60% | 10.80% |
| Tax rate | 27.60% | 28.20% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 7.3% | 10.2% |
| Selected WACC | 8.7% | |
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 ONT.AX:
cost_of_equity (9.20%) = risk_free_rate (3.95%) + equity_risk_premium (5.20%) * adjusted_beta (0.82) + 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.