The WACC of Trans-Siberian Gold PLC (TSG.L) is 8.7%.
| Range | Selected | |
| Cost of equity | 7.50% - 11.00% | 9.25% |
| Tax rate | 25.70% - 27.10% | 26.40% |
| Cost of debt | 4.00% - 7.60% | 5.80% |
| WACC | 7.0% - 10.4% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 0.85 | 1.11 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.50% | 11.00% |
| Tax rate | 25.70% | 27.10% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 4.00% | 7.60% |
| After-tax WACC | 7.0% | 10.4% |
| Selected WACC | 8.7% | |
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 TSG.L:
cost_of_equity (9.25%) = risk_free_rate (3.15%) + equity_risk_premium (5.80%) * adjusted_beta (0.85) + 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.