The WACC of RS PCL (RS.BK) is 5.5%.
| Range | Selected | |
| Cost of equity | 14.40% - 22.30% | 18.35% |
| Tax rate | 14.10% - 20.50% | 17.30% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.9% - 6.0% | 5.5% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 1.59 | 2.22 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.40% | 22.30% |
| Tax rate | 14.10% | 20.50% |
| Debt/Equity ratio | 6.59 | 6.59 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.9% | 6.0% |
| Selected WACC | 5.5% | |
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 RS.BK:
cost_of_equity (18.35%) = risk_free_rate (2.85%) + equity_risk_premium (7.90%) * adjusted_beta (1.59) + 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.