The WACC of Victoria PLC (VCP.L) is 5.1%.
| Range | Selected | |
| Cost of equity | 11.80% - 26.30% | 19.05% |
| Tax rate | 14.20% - 17.50% | 15.85% |
| Cost of debt | 4.00% - 6.20% | 5.10% |
| WACC | 3.9% - 6.2% | 5.1% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.31 | 3.05 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.80% | 26.30% |
| Tax rate | 14.20% | 17.50% |
| Debt/Equity ratio | 18.02 | 18.02 |
| Cost of debt | 4.00% | 6.20% |
| After-tax WACC | 3.9% | 6.2% |
| Selected WACC | 5.1% | |
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 VCP.L:
cost_of_equity (19.05%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.31) + 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.