The WACC of Seneca Global Income & Growth Trust PLC (SIGT.L) is 9.6%.
| Range | Selected | |
| Cost of equity | 8.80% - 11.50% | 10.15% |
| Tax rate | 19.00% - 19.00% | 19.00% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 8.3% - 10.9% | 9.6% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 1.1 | 1.19 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.80% | 11.50% |
| Tax rate | 19.00% | 19.00% |
| Debt/Equity ratio | 0.11 | 0.11 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 8.3% | 10.9% |
| Selected WACC | 9.6% | |
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 SIGT.L:
cost_of_equity (10.15%) = risk_free_rate (3.15%) + equity_risk_premium (5.80%) * adjusted_beta (1.1) + 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.