The WACC of Spectris PLC (SXS.L) is 10.5%.
| Range | Selected | |
| Cost of equity | 11.00% - 13.90% | 12.45% |
| Tax rate | 22.40% - 23.50% | 22.95% |
| Cost of debt | 5.10% - 8.90% | 7.00% |
| WACC | 9.1% - 12.0% | 10.5% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.18 | 1.28 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.00% | 13.90% |
| Tax rate | 22.40% | 23.50% |
| Debt/Equity ratio | 0.37 | 0.37 |
| Cost of debt | 5.10% | 8.90% |
| After-tax WACC | 9.1% | 12.0% |
| Selected WACC | 10.5% | |
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 SXS.L:
cost_of_equity (12.45%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.18) + 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.