The WACC of Redrow PLC (RDW.L) is 14.3%.
| Range | Selected | |
| Cost of equity | 10.00% - 15.50% | 12.75% |
| Tax rate | 19.70% - 21.80% | 20.75% |
| Cost of debt | 4.60% - 35.60% | 20.10% |
| WACC | 6.8% - 21.7% | 14.3% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.01 | 1.51 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.00% | 15.50% |
| Tax rate | 19.70% | 21.80% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 4.60% | 35.60% |
| After-tax WACC | 6.8% | 21.7% |
| Selected WACC | 14.3% | |
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 RDW.L:
cost_of_equity (12.75%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * 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.