The WACC of Rio2 Ltd (RIO.V) is 11.3%.
| Range | Selected | |
| Cost of equity | 10.00% - 12.60% | 11.30% |
| Tax rate | 0.10% - 0.70% | 0.40% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 10.0% - 12.6% | 11.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.2 | 1.27 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.00% | 12.60% |
| Tax rate | 0.10% | 0.70% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 10.0% | 12.6% |
| Selected WACC | 11.3% | |
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.V:
cost_of_equity (11.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.60%) * adjusted_beta (1.2) + 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.