The WACC of Round Hill Music Royalty Fund Ltd (RHM.L) is 8.8%.
| Range | Selected | |
| Cost of equity | 7.10% - 9.50% | 8.30% |
| Tax rate | 21.40% - 32.20% | 26.80% |
| Cost of debt | 15.80% - 15.80% | 15.80% |
| WACC | 8.0% - 9.7% | 8.8% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.5% | 6.5% |
| Adjusted beta | 0.57 | 0.69 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.10% | 9.50% |
| Tax rate | 21.40% | 32.20% |
| Debt/Equity ratio | 0.19 | 0.19 |
| Cost of debt | 15.80% | 15.80% |
| After-tax WACC | 8.0% | 9.7% |
| Selected WACC | 8.8% | |
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 RHM.L:
cost_of_equity (8.30%) = risk_free_rate (4.25%) + equity_risk_premium (6.00%) * 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.