Which of the following is NOT a component of the WACC calculation?

The Dividend payout ratio is not a component of the WACC (Weighted Average Cost of Capital) calculation. WACC is primarily focused on the average rate of return a company is expected to pay its security holders to finance its assets, incorporating the costs of equity and debt based on their proportional weights in the overall capital structure.

The cost of equity is a critical component, reflecting the return required by equity investors, while the cost of capital from retained earnings pertains to the cost of reinvested profits as an alternative to paying dividends. The market risk premium, although related to equity valuation and risk assessment, is directly integrated into the calculation of cost of equity through models such as the Capital Asset Pricing Model (CAPM).

In contrast, the dividend payout ratio is a measure of how much profit a company distributes to its shareholders as dividends compared to its total earnings. While it might influence the company's overall financial strategy, it does not directly affect the WACC calculation itself.