The WACC of Shopping Centres Australasia Property Group Re Ltd (SCP.AX) is 8.5%.
| Range | Selected | |
| Cost of equity | 8.90% - 11.20% | 10.05% |
| Tax rate | 0.10% - 0.20% | 0.15% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 7.2% - 9.8% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 4.1% | 4.6% |
| Equity market risk premium | 5.5% | 6.5% |
| Adjusted beta | 0.86 | 0.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.90% | 11.20% |
| Tax rate | 0.10% | 0.20% |
| Debt/Equity ratio | 0.5 | 0.5 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 7.2% | 9.8% |
| Selected WACC | 8.5% | |
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 SCP.AX:
cost_of_equity (10.05%) = risk_free_rate (4.35%) + equity_risk_premium (6.00%) * adjusted_beta (0.86) + 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.