The WACC of A2A SpA (A2A.MI) is 6.7%.
| Range | Selected | |
| Cost of equity | 8.70% - 11.80% | 10.25% |
| Tax rate | 22.00% - 24.10% | 23.05% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 5.9% - 7.6% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.61 | 0.77 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.70% | 11.80% |
| Tax rate | 22.00% | 24.10% |
| Debt/Equity ratio | 1.04 | 1.04 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 5.9% | 7.6% |
| Selected WACC | 6.7% | |
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 A2A.MI:
cost_of_equity (10.25%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.61) + 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.