The WACC of Les Hotels Baverez SA (ALLHB.PA) is 5.9%.
| Range | Selected | |
| Cost of equity | 4.90% - 6.90% | 5.90% |
| Tax rate | 0.60% - 5.50% | 3.05% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.0% - 6.8% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.34 | 0.43 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.90% | 6.90% |
| Tax rate | 0.60% | 5.50% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.0% | 6.8% |
| Selected WACC | 5.9% | |
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 ALLHB.PA:
cost_of_equity (5.90%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (0.34) + 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.