TPK.L WACC - Weighted Average Cost of Capital

The WACC of Travis Perkins PLC (TPK.L) is 6.1%.

The Cost of Equity of Travis Perkins PLC (TPK.L) is 7.45%.

The Cost of Debt of Travis Perkins PLC (TPK.L) is 5.85%.

	Range	Selected
Cost of equity	6.30% - 8.60%	7.45%
Tax rate	21.40% - 23.40%	22.40%
Cost of debt	4.10% - 7.60%	5.85%
WACC	4.8% - 7.3%	6.1%

WACC

TPK.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.39	0.52

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.30%	8.60%

Tax rate	21.40%	23.40%
Debt/Equity ratio	0.89	0.89
Cost of debt	4.10%	7.60%

After-tax WACC	4.8%	7.3%


Selected WACC	6.1%

TPK.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 TPK.L:

cost_of_equity (7.45%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.39) + 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.