Equatorial Resources (ASX:EQX) WACC %

:5.48% (As of Today)

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As of today (2023-03-21), Equatorial Resources's weighted average cost of capital is 5.48%. Equatorial Resources's ROIC % is -21600.00% (calculated using TTM income statement data). Equatorial Resources earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Equatorial Resources WACC % Historical Data

The historical data trend for Equatorial Resources's WACC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Equatorial Resources Annual Data

Trend

Jun13

Jun14

Jun15

Jun16

Jun17

Jun18

Jun19

Jun20

Jun21

Jun22

WACC %

-0.34

2.72

4.57

4.70

6.55

Equatorial Resources Semi-Annual Data
	Jun13	Dec13	Jun14	Dec14	Jun15	Dec15	Jun16	Dec16	Jun17	Dec17	Jun18	Dec18	Jun19	Dec19	Jun20	Dec20	Jun21	Dec21	Jun22	Dec22
WACC %																-	4.70	-	6.55	-

Competitive Comparison

For the Steel subindustry, Equatorial Resources's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Annual Data Quarterly Data

Equatorial Resources WACC % Distribution

For the Steel industry and Basic Materials sector, Equatorial Resources's WACC % distribution charts can be found below:

* The bar in red indicates where Equatorial Resources's WACC % falls in comparison to its industry or sector. The grey bar indicates the WACC %'s extreme value range as defined by GuruFocus.

Equatorial Resources WACC % Calculation

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.

WACC

(E + D)

Cost of Equity

(E + D)

Cost of Debt

(1 - Tax Rate)

1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, Equatorial Resources's market capitalization (E) is A$18.262 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Dec. 2022, Equatorial Resources's latest two-year average Short-Term Debt & Capital Lease Obligation was A$0 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was A$0 Mil. The total Book Value of Debt (D) is A$0 Mil.
a) weight of equity = E / (E + D) = 18.262 / (18.262 + 0) = 1
b) weight of debt = D / (E + D) = 0 / (18.262 + 0) = 0

2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 3.62000000%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. Equatorial Resources's beta is 0.31.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 3.62000000% + 0.31 * 6% = 5.48%

3. Cost of Debt:
GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.
As of Jun. 2022, Equatorial Resources's interest expense (positive number) was A$0 Mil. Its total Book Value of Debt (D) is A$0 Mil.
Cost of Debt = 0 / 0 = %.

4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation. The calculated average tax rate is limited to between 0% and 100%. If the calculated average tax rate is higher than 100%, it is set to 100%. If the calculated average tax rate is less than 0%, it is set to 0%.
The latest Two-year Average Tax Rate is 0%.

Equatorial Resources's Weighted Average Cost Of Capital (WACC) for Today is calculated as:

WACC	=	E / (E + D)	*	Cost of Equity	+	D / (E + D)	*	Cost of Debt	*	(1 - Tax Rate)
	=	1	*	5.48%	+	0	*	%	*	(1 - 0%)
	=	5.48%

Equatorial Resources (ASX:EQX) WACC % Explanation

Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Equatorial Resources's weighted average cost of capital is 5.48%. Equatorial Resources's ROIC % is -21600.00% (calculated using TTM income statement data). Equatorial Resources earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Be Aware

1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.

2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.

3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.

4. GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.

Related Terms

Equatorial Resources (ASX:EQX) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Steel » Equatorial Resources Ltd (ASX:EQX) » Definitions » WACC %

Comparable Companies

Traded in Other Exchanges

PBU:Germany

Address

28 The Esplanade, Level 9, BGC Centre, Perth, WA, AUS, 6000

Website

https://www.equatorialresources.com.au

Equatorial Resources Ltd is an iron ore exploration and development company. The company's iron ore projects are located in the Republic of Congo (ROC). The company focuses on advancing its existing mineral resource assets in Africa, as well as searching for new opportunities in the resources sector. It operates the Badondo Iron Project located in the northwest region of the Republic of Congo. Central & West Africa hosts a regional distribution of undeveloped world-class high-grade iron ore deposits. It is comprised of the same rock type and similar geological formation as the Carajas System in South America.