The WACC of Pipehawk PLC (PIP.L) is 4.7%.
| Range | Selected | |
| Cost of equity | 3.20% - 12.10% | 7.65% |
| Tax rate | 19.00% - 19.00% | 19.00% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 3.2% - 6.2% | 4.7% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | -0.21 | 0.95 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 3.20% | 12.10% |
| Tax rate | 19.00% | 19.00% |
| Debt/Equity ratio | 10.87 | 10.87 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 3.2% | 6.2% |
| Selected WACC | 4.7% | |
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 PIP.L:
cost_of_equity (7.65%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (-0.21) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.