The WACC of Acea SpA (ACE.MI) is 5.6%.
| Range | Selected | |
| Cost of equity | 7.70% - 10.00% | 8.85% |
| Tax rate | 30.60% - 31.70% | 31.15% |
| Cost of debt | 4.00% - 4.70% | 4.35% |
| WACC | 5.0% - 6.3% | 5.6% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.48 | 0.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.70% | 10.00% |
| Tax rate | 30.60% | 31.70% |
| Debt/Equity ratio | 1.23 | 1.23 |
| Cost of debt | 4.00% | 4.70% |
| After-tax WACC | 5.0% | 6.3% |
| Selected WACC | 5.6% | |
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 ACE.MI:
cost_of_equity (8.85%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.48) + 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.