RIO.L WACC - Weighted Average Cost of Capital

The WACC of Rio Tinto PLC (RIO.L) is 9.4%.

The Cost of Equity of Rio Tinto PLC (RIO.L) is 10.05%.

The Cost of Debt of Rio Tinto PLC (RIO.L) is 4.45%.

	Range	Selected
Cost of equity	8.30% - 11.80%	10.05%
Tax rate	27.40% - 28.70%	28.05%
Cost of debt	4.30% - 4.60%	4.45%
WACC	7.8% - 11.0%	9.4%

WACC

RIO.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.72	0.98

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.30%	11.80%

Tax rate	27.40%	28.70%
Debt/Equity ratio	0.11	0.11
Cost of debt	4.30%	4.60%

After-tax WACC	7.8%	11.0%


Selected WACC	9.4%

RIO.L'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 RIO.L:

cost_of_equity (10.05%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.72) + 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.