The WACC of Regional REIT Ltd (RGL.L) is 7.5%.
| Range | Selected | |
| Cost of equity | 10.20% - 13.50% | 11.85% |
| Tax rate | -% - 0.10% | 0.05% |
| Cost of debt | 4.00% - 7.10% | 5.55% |
| WACC | 5.9% - 9.1% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.03 | 1.21 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.20% | 13.50% |
| Tax rate | -% | 0.10% |
| Debt/Equity ratio | 2.21 | 2.21 |
| Cost of debt | 4.00% | 7.10% |
| After-tax WACC | 5.9% | 9.1% |
| Selected WACC | 7.5% | |
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 RGL.L:
cost_of_equity (11.85%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.03) + 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.