The WACC of Pacific Assets Trust PLC (PAC.L) is 8.8%.
| Range | Selected | |
| Cost of equity | 11.10% - 14.60% | 12.85% |
| Tax rate | 4.90% - 8.60% | 6.75% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.9% - 9.6% | 8.8% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 1.52 | 1.68 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.10% | 14.60% |
| Tax rate | 4.90% | 8.60% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.9% | 9.6% |
| Selected WACC | 8.8% | |
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 PAC.L:
cost_of_equity (12.85%) = risk_free_rate (3.15%) + equity_risk_premium (5.80%) * adjusted_beta (1.52) + 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.