The WACC of Pipehawk PLC (PIP.L) is 4.4%.
| Range | Selected | |
| Cost of equity | 3.00% - 12.60% | 7.80% |
| Tax rate | 21.20% - 32.60% | 26.90% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 3.1% - 5.6% | 4.4% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | -0.16 | 1.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 3.00% | 12.60% |
| Tax rate | 21.20% | 32.60% |
| Debt/Equity ratio | 7.78 | 7.78 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 3.1% | 5.6% |
| Selected WACC | 4.4% | |
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 PIP.L:
cost_of_equity (7.80%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (-0.16) + 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.