The WACC of Victoria PLC (VCP.L) is 7.8%.
| Range | Selected | |
| Cost of equity | 14.70% - 21.40% | 18.05% |
| Tax rate | 12.80% - 17.20% | 15.00% |
| Cost of debt | 4.10% - 12.50% | 8.30% |
| WACC | 4.4% - 11.2% | 7.8% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.8 | 2.35 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.70% | 21.40% |
| Tax rate | 12.80% | 17.20% |
| Debt/Equity ratio | 12.72 | 12.72 |
| Cost of debt | 4.10% | 12.50% |
| After-tax WACC | 4.4% | 11.2% |
| Selected WACC | 7.8% | |
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 (18.05%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.8) + 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.