RDM.AX WACC - Weighted Average Cost of Capital
The WACC of Red Metal Ltd (RDM.AX) is 8.5%.
| Range | Selected | |
| Cost of equity | 6.7% - 10.4% | 8.55% |
| Tax rate | 30.0% - 30.0% | 30% |
| Cost of debt | 4.0% - 7.0% | 5.5% |
| WACC | 6.7% - 10.3% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.53 | 0.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.7% | 10.4% |
| Tax rate | 30.0% | 30.0% |
| Debt/Equity ratio | 0.01 | 0.01 |
| Cost of debt | 4.0% | 7.0% |
| After-tax WACC | 6.7% | 10.3% |
| Selected WACC | 8.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| RDM.AX | Red Metal Ltd | 0.01 | 1.06 | 1.05 |
| ARR.AX | American Rare Earths Ltd | 0 | 0.78 | 0.78 |
| CWX.AX | Carawine Resources Ltd | 0 | -0.23 | -0.23 |
| FFR.AX | Firefly Resources Ltd | 0 | 0.87 | 0.87 |
| LSA.AX | Lachlan Star Ltd | 0.01 | 2.06 | 2.04 |
| MNB.AX | Minbos Resources Ltd | 0.02 | 1.25 | 1.23 |
| PNX.AX | PNX Metals Ltd | 0.01 | -0.84 | -0.84 |
| SKY.AX | Sky Metals Ltd | 0.01 | 0.64 | 0.64 |
| STM.AX | Sunstone Metals Ltd | 0 | -0.31 | -0.31 |
| TAS.AX | Tasman Resources Ltd | 5.62 | -2 | -0.41 |
| Low | High | |
| Unlevered beta | 0.29 | 0.82 |
| Relevered beta | 0.3 | 0.82 |
| Adjusted relevered beta | 0.53 | 0.88 |
RDM.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 RDM.AX:
cost_of_equity (8.55%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.53) + 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.