AIRARABIA.DB WACC - Weighted Average Cost of Capital

The WACC of Air Arabia PJSC (AIRARABIA.DB) is 9.5%.

The Cost of Equity of Air Arabia PJSC (AIRARABIA.DB) is 10.25%.

The Cost of Debt of Air Arabia PJSC (AIRARABIA.DB) is 6.50%.

	Range	Selected
Cost of equity	9.30% - 11.20%	10.25%
Tax rate	33.00% - 55.00%	44.00%
Cost of debt	6.50% - 6.50%	6.50%
WACC	8.7% - 10.2%	9.5%

WACC

AIRARABIA.DB WACC calculation

Category	Low	High

Long-term bond rate	5.9%	6.4%
Equity market risk premium	5.8%	6.8%
Adjusted beta	0.59	0.64

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.30%	11.20%

Tax rate	33.00%	55.00%
Debt/Equity ratio	0.14	0.14
Cost of debt	6.50%	6.50%

After-tax WACC	8.7%	10.2%


Selected WACC	9.5%

AIRARABIA.DB's CAPM model and how its cost of Equity is calculated

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 (10.25%) = risk_free_rate (6.15%) + equity_risk_premium (6.30%) * adjusted_beta (0.59) + 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.