The WACC of ABN Amro Bank NV (ABN.AS) is 5.0%.
| Range | Selected | |
| Cost of equity | 12.20% - 15.90% | 14.05% |
| Tax rate | 27.40% - 30.90% | 29.15% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.8% - 5.2% | 5.0% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.89 | 2.03 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.20% | 15.90% |
| Tax rate | 27.40% | 30.90% |
| Debt/Equity ratio | 6.06 | 6.06 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.8% | 5.2% |
| Selected WACC | 5.0% | |
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 ABN.AS:
cost_of_equity (14.05%) = risk_free_rate (2.85%) + equity_risk_premium (5.60%) * adjusted_beta (1.89) + 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.