The WACC of ALM Equity AB (ALM.ST) is 9.8%.
| Range | Selected | |
| Cost of equity | 5.40% - 7.80% | 6.60% |
| Tax rate | 1.00% - 1.30% | 1.15% |
| Cost of debt | 5.20% - 19.50% | 12.35% |
| WACC | 5.3% - 14.4% | 9.8% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.37 | 0.54 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 5.40% | 7.80% |
| Tax rate | 1.00% | 1.30% |
| Debt/Equity ratio | 1.37 | 1.37 |
| Cost of debt | 5.20% | 19.50% |
| After-tax WACC | 5.3% | 14.4% |
| 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 ALM.ST:
cost_of_equity (6.60%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (0.37) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.