The WACC of ALM Equity AB (ALM.ST) is 10.3%.
| Range | Selected | |
| Cost of equity | 6.20% - 9.50% | 7.85% |
| Tax rate | 1.00% - 1.30% | 1.15% |
| Cost of debt | 5.20% - 19.50% | 12.35% |
| WACC | 5.6% - 15.0% | 10.3% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.73 | 0.99 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.20% | 9.50% |
| Tax rate | 1.00% | 1.30% |
| Debt/Equity ratio | 1.28 | 1.28 |
| Cost of debt | 5.20% | 19.50% |
| After-tax WACC | 5.6% | 15.0% |
| Selected WACC | 10.3% | |
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 (7.85%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (0.73) + 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.