The WACC of Africa Israel Residences Ltd (AFRE.TA) is 7.8%.
| Range | Selected | |
| Cost of equity | 8.40% - 10.70% | 9.55% |
| Tax rate | 18.70% - 20.20% | 19.45% |
| Cost of debt | 4.00% - 8.00% | 6.00% |
| WACC | 6.5% - 9.2% | 7.8% |
| Category | Low | High |
| Long-term bond rate | 4.8% | 5.3% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.58 | 0.69 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.40% | 10.70% |
| Tax rate | 18.70% | 20.20% |
| Debt/Equity ratio | 0.57 | 0.57 |
| Cost of debt | 4.00% | 8.00% |
| After-tax WACC | 6.5% | 9.2% |
| Selected WACC | 7.8% | |
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 AFRE.TA:
cost_of_equity (9.55%) = risk_free_rate (5.05%) + equity_risk_premium (6.60%) * adjusted_beta (0.58) + 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.