The WACC of Air Arabia PJSC (AIRARABIA.DB) is 9.8%.
| Range | Selected | |
| Cost of equity | 9.50% - 11.80% | 10.65% |
| Tax rate | 33.00% - 55.00% | 44.00% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.8% - 10.7% | 9.8% |
| Category | Low | High |
| Long-term bond rate | 5.9% | 6.4% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.63 | 0.71 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.50% | 11.80% |
| Tax rate | 33.00% | 55.00% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.8% | 10.7% |
| Selected WACC | 9.8% | |
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 AIRARABIA.DB:
cost_of_equity (10.65%) = risk_free_rate (6.15%) + equity_risk_premium (6.30%) * adjusted_beta (0.63) + 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.