The WACC of Devernois SA (ALDEV.PA) is 8.4%.
| Range | Selected | |
| Cost of equity | 6.70% - 10.00% | 8.35% |
| Tax rate | 7.80% - 11.00% | 9.40% |
| Cost of debt | 4.00% - 14.80% | 9.40% |
| WACC | 4.5% - 12.3% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.64 | 0.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.70% | 10.00% |
| Tax rate | 7.80% | 11.00% |
| Debt/Equity ratio | 2.54 | 2.54 |
| Cost of debt | 4.00% | 14.80% |
| After-tax WACC | 4.5% | 12.3% |
| Selected WACC | 8.4% | |
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 ALDEV.PA:
cost_of_equity (8.35%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (0.64) + 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.