The WACC of ABN Amro Bank NV (ABN.AS) is 5.4%.
| Range | Selected | |
| Cost of equity | 9.20% - 13.60% | 11.40% |
| Tax rate | 25.80% - 28.10% | 26.95% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.9% - 5.8% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.3 | 1.65 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.20% | 13.60% |
| Tax rate | 25.80% | 28.10% |
| Debt/Equity ratio | 3.5 | 3.5 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.9% | 5.8% |
| Selected WACC | 5.4% | |
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 (11.40%) = risk_free_rate (2.85%) + equity_risk_premium (5.60%) * adjusted_beta (1.3) + 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.