SMDS.L WACC - Weighted Average Cost of Capital

The WACC of DS Smith PLC (SMDS.L) is 7.8%.

The Cost of Equity of DS Smith PLC (SMDS.L) is 9.25%.

The Cost of Debt of DS Smith PLC (SMDS.L) is 4.45%.

	Range	Selected
Cost of equity	7.90% - 10.60%	9.25%
Tax rate	22.60% - 24.30%	23.45%
Cost of debt	4.00% - 4.90%	4.45%
WACC	6.7% - 8.8%	7.8%

WACC

SMDS.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.65	0.8

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.90%	10.60%

Tax rate	22.60%	24.30%
Debt/Equity ratio	0.34	0.34
Cost of debt	4.00%	4.90%

After-tax WACC	6.7%	8.8%


Selected WACC	7.8%

SMDS.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 SMDS.L:

cost_of_equity (9.25%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.65) + 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.