The WACC of ALD SA (ALD.PA) is 9.1%.
| Range | Selected | |
| Cost of equity | 27.10% - 35.40% | 31.25% |
| Tax rate | 25.70% - 27.20% | 26.45% |
| Cost of debt | 4.00% - 15.50% | 9.75% |
| WACC | 4.9% - 13.2% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 4.21 | 4.66 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 27.10% | 35.40% |
| Tax rate | 25.70% | 27.20% |
| Debt/Equity ratio | 11.38 | 11.38 |
| Cost of debt | 4.00% | 15.50% |
| After-tax WACC | 4.9% | 13.2% |
| Selected WACC | 9.1% | |
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 ALD.PA:
cost_of_equity (31.25%) = risk_free_rate (2.85%) + equity_risk_premium (6.30%) * adjusted_beta (4.21) + 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.