SOL.AX WACC - Weighted Average Cost of Capital

The WACC of Washington H Soul Pattinson and Company Ltd (SOL.AX) is 8.9%.

The Cost of Equity of Washington H Soul Pattinson and Company Ltd (SOL.AX) is 9.15%.

The Cost of Debt of Washington H Soul Pattinson and Company Ltd (SOL.AX) is 5.60%.

	Range	Selected
Cost of equity	7.90% - 10.40%	9.15%
Tax rate	15.50% - 23.90%	19.70%
Cost of debt	4.00% - 7.20%	5.60%
WACC	7.6% - 10.1%	8.9%

WACC

SOL.AX WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.76	0.88

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.90%	10.40%

Tax rate	15.50%	23.90%
Debt/Equity ratio	0.06	0.06
Cost of debt	4.00%	7.20%

After-tax WACC	7.6%	10.1%


Selected WACC	8.9%

SOL.AX'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 SOL.AX:

cost_of_equity (9.15%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.76) + 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.