The WACC of Geo Energy Resources Ltd (RE4.SI) is 11.0%.
| Range | Selected | |
| Cost of equity | 5.60% - 9.00% | 7.30% |
| Tax rate | 19.60% - 26.00% | 22.80% |
| Cost of debt | 4.00% - 41.30% | 22.65% |
| WACC | 4.7% - 17.3% | 11.0% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.57 | 0.87 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.60% | 9.00% |
| Tax rate | 19.60% | 26.00% |
| Debt/Equity ratio | 0.63 | 0.63 |
| Cost of debt | 4.00% | 41.30% |
| After-tax WACC | 4.7% | 17.3% |
| Selected WACC | 11.0% | |
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 RE4.SI:
cost_of_equity (7.30%) = risk_free_rate (2.95%) + equity_risk_premium (5.60%) * adjusted_beta (0.57) + 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.