The WACC of Skellerup Holdings Ltd (SKL.NZ) is 11.4%.
| Range | Selected | |
| Cost of equity | 10.40% - 13.20% | 11.80% |
| Tax rate | 25.80% - 26.00% | 25.90% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 10.0% - 12.7% | 11.4% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.19 | 1.29 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.40% | 13.20% |
| Tax rate | 25.80% | 26.00% |
| Debt/Equity ratio | 0.06 | 0.06 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 10.0% | 12.7% |
| Selected WACC | 11.4% | |
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 SKL.NZ:
cost_of_equity (11.80%) = risk_free_rate (4.55%) + equity_risk_premium (5.60%) * adjusted_beta (1.19) + 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.