RTO.L WACC - Weighted Average Cost of Capital

The WACC of Rentokil Initial PLC (RTO.L) is 7.7%.

The Cost of Equity of Rentokil Initial PLC (RTO.L) is 10.15%.

The Cost of Debt of Rentokil Initial PLC (RTO.L) is 5.55%.

	Range	Selected
Cost of equity	8.20% - 12.10%	10.15%
Tax rate	22.30% - 23.70%	23.00%
Cost of debt	4.00% - 7.10%	5.55%
WACC	6.1% - 9.3%	7.7%

WACC

RTO.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.71	1.01

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.20%	12.10%

Tax rate	22.30%	23.70%
Debt/Equity ratio	0.7	0.7
Cost of debt	4.00%	7.10%

After-tax WACC	6.1%	9.3%


Selected WACC	7.7%

RTO.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 RTO.L:

cost_of_equity (10.15%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.71) + 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.