The WACC of John Wood Group PLC (WG.L) is 6.1%.
| Range | Selected | |
| Cost of equity | 11.20% - 17.40% | 14.30% |
| Tax rate | 15.10% - 29.00% | 22.05% |
| Cost of debt | 5.50% - 7.00% | 6.25% |
| WACC | 5.6% - 6.7% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.21 | 1.78 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.20% | 17.40% |
| Tax rate | 15.10% | 29.00% |
| Debt/Equity ratio | 6.22 | 6.22 |
| Cost of debt | 5.50% | 7.00% |
| After-tax WACC | 5.6% | 6.7% |
| Selected WACC | 6.1% | |
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 WG.L:
cost_of_equity (14.30%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.21) + 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.