TLS.AX WACC - Weighted Average Cost of Capital

The WACC of Telstra Corporation Ltd (TLS.AX) is 6.4%.

The Cost of Equity of Telstra Corporation Ltd (TLS.AX) is 7.30%.

The Cost of Debt of Telstra Corporation Ltd (TLS.AX) is 5.00%.

	Range	Selected
Cost of equity	6.00% - 8.60%	7.30%
Tax rate	27.20% - 27.80%	27.50%
Cost of debt	5.00% - 5.00%	5.00%
WACC	5.4% - 7.3%	6.4%

WACC

TLS.AX WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.38	0.58

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.00%	8.60%

Tax rate	27.20%	27.80%
Debt/Equity ratio	0.33	0.33
Cost of debt	5.00%	5.00%

After-tax WACC	5.4%	7.3%


Selected WACC	6.4%

TLS.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 TLS.AX:

cost_of_equity (7.30%) = risk_free_rate (4.25%) + equity_risk_premium (5.60%) * adjusted_beta (0.38) + 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.