The WACC of Tetragon Financial Group Ltd (TFG.AS) is 7.5%.
| Range | Selected | |
| Cost of equity | 6.40% - 9.00% | 7.70% |
| Tax rate | 25.00% - 25.30% | 25.15% |
| Cost of debt | 4.00% - 13.50% | 8.75% |
| WACC | 5.7% - 9.2% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.84 | 0.97 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.40% | 9.00% |
| Tax rate | 25.00% | 25.30% |
| Debt/Equity ratio | 0.27 | 0.27 |
| Cost of debt | 4.00% | 13.50% |
| After-tax WACC | 5.7% | 9.2% |
| Selected WACC | 7.5% | |
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 TFG.AS:
cost_of_equity (7.70%) = risk_free_rate (2.85%) + equity_risk_premium (5.10%) * adjusted_beta (0.84) + 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.