The WACC of PM Capital Asian Opportunities Fund Ltd (PAF.AX) is 9.4%.
| Range | Selected | |
| Cost of equity | 8.40% - 10.40% | 9.40% |
| Tax rate | 27.90% - 28.90% | 28.40% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 8.4% - 10.4% | 9.4% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 1.01 | 1.01 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.40% | 10.40% |
| Tax rate | 27.90% | 28.90% |
| Debt/Equity ratio | 0.01 | 0.01 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 8.4% | 10.4% |
| Selected WACC | 9.4% | |
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 PAF.AX:
cost_of_equity (9.40%) = risk_free_rate (3.95%) + equity_risk_premium (5.20%) * adjusted_beta (1.01) + 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.