The WACC of Whitbread PLC (WTB.L) is 6.3%.
| Range | Selected | |
| Cost of equity | 8.20% - 10.30% | 9.25% |
| Tax rate | 26.40% - 28.50% | 27.45% |
| Cost of debt | 4.00% - 6.20% | 5.10% |
| WACC | 5.4% - 7.2% | 6.3% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.7 | 0.76 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.20% | 10.30% |
| Tax rate | 26.40% | 28.50% |
| Debt/Equity ratio | 1.14 | 1.14 |
| Cost of debt | 4.00% | 6.20% |
| After-tax WACC | 5.4% | 7.2% |
| Selected WACC | 6.3% | |
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 WTB.L:
cost_of_equity (9.25%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.7) + 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.