VEL.L WACC - Weighted Average Cost of Capital

The WACC of Velocity Composites PLC (VEL.L) is 10.4%.

The Cost of Equity of Velocity Composites PLC (VEL.L) is 11.75%.

The Cost of Debt of Velocity Composites PLC (VEL.L) is 7.15%.

	Range	Selected
Cost of equity	10.10% - 13.40%	11.75%
Tax rate	8.10% - 15.50%	11.80%
Cost of debt	7.00% - 7.30%	7.15%
WACC	9.2% - 11.6%	10.4%

WACC

VEL.L WACC calculation

Category	Low	High

Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	1.02	1.2

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.10%	13.40%

Tax rate	8.10%	15.50%
Debt/Equity ratio	0.31	0.31
Cost of debt	7.00%	7.30%

After-tax WACC	9.2%	11.6%


Selected WACC	10.4%

VEL.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 VEL.L:

cost_of_equity (11.75%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.02) + 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.