British American Tobacco PLC (BATS.L) WACC Analysis

As of June 2, 2025, British American Tobacco PLC (BATS.L) carries a Weighted Average Cost of Capital (WACC) of 6.8%. WACC reflects the blended rate British American Tobacco PLC must pay to both equity and debt holders.

Within that, the cost of equity is 6.8%, the cost of debt is 4.1%, and the effective tax rate is 22.1%.

Breakdown of WACC Components

• Long-term bond rate: 4.0% – 4.5%
• Equity market risk premium: 6.0% – 7.0%
• Adjusted beta: 0.47 – 0.52
• Additional risk adjustment: 0.0% – 0.5%
• Debt-to-equity ratio: 0.5

What It Means for Investors

With a selected WACC of 6.8%, British American Tobacco PLC must ensure any new investment returns exceed this threshold to generate shareholder value. This level reflects an attractive low cost of capital.