OTW.AX WACC - Weighted Average Cost of Capital

The WACC of Over The Wire Holdings Ltd (OTW.AX) is 8.6%.

The Cost of Equity of Over The Wire Holdings Ltd (OTW.AX) is 9.40%.

The Cost of Debt of Over The Wire Holdings Ltd (OTW.AX) is 5.50%.

	Range	Selected
Cost of equity	8.20% - 10.60%	9.40%
Tax rate	27.90% - 29.30%	28.60%
Cost of debt	4.00% - 7.00%	5.50%
WACC	7.5% - 9.8%	8.6%

WACC

OTW.AX WACC calculation

Category	Low	High

Long-term bond rate	3.7%	4.2%
Equity market risk premium	4.7%	5.7%
Adjusted beta	0.96	1.03

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.20%	10.60%

Tax rate	27.90%	29.30%
Debt/Equity ratio	0.16	0.16
Cost of debt	4.00%	7.00%

After-tax WACC	7.5%	9.8%


Selected WACC	8.6%

OTW.AX's CAPM model and how its cost of Equity is calculated

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 OTW.AX:

cost_of_equity (9.40%) = risk_free_rate (3.95%) + equity_risk_premium (5.20%) * adjusted_beta (0.96) + 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.