The WACC of SKY Network Television Ltd (SKT.NZ) is 7.9%.
| Range | Selected | |
| Cost of equity | 6.40% - 10.10% | 8.25% |
| Tax rate | 28.20% - 28.50% | 28.35% |
| Cost of debt | 4.90% - 10.30% | 7.60% |
| WACC | 6.0% - 9.7% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.41 | 0.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.40% | 10.10% |
| Tax rate | 28.20% | 28.50% |
| Debt/Equity ratio | 0.16 | 0.16 |
| Cost of debt | 4.90% | 10.30% |
| After-tax WACC | 6.0% | 9.7% |
| Selected WACC | 7.9% | |
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 SKT.NZ:
cost_of_equity (8.25%) = risk_free_rate (4.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.41) + 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.