RED.AX WACC - Weighted Average Cost of Capital

The WACC of Red 5 Ltd (RED.AX) is 9.1%.

The Cost of Equity of Red 5 Ltd (RED.AX) is 9.50%.

The Cost of Debt of Red 5 Ltd (RED.AX) is 5.50%.

	Range	Selected
Cost of equity	7.20% - 11.80%	9.50%
Tax rate	1.10% - 14.50%	7.80%
Cost of debt	4.00% - 7.00%	5.50%
WACC	7.0% - 11.3%	9.1%

WACC

RED.AX WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.63	1.1

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.20%	11.80%

Tax rate	1.10%	14.50%
Debt/Equity ratio	0.09	0.09
Cost of debt	4.00%	7.00%

After-tax WACC	7.0%	11.3%


Selected WACC	9.1%

RED.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 RED.AX:

cost_of_equity (9.50%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.63) + 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.