The WACC of Awilco LNG ASA (ALNG.OL) is 9.5%.
| Range | Selected | |
| Cost of equity | 9.00% - 16.90% | 12.95% |
| Tax rate | 22.00% - 22.00% | 22.00% |
| Cost of debt | 7.40% - 15.10% | 11.25% |
| WACC | 6.4% - 12.7% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.11 | 2.06 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.00% | 16.90% |
| Tax rate | 22.00% | 22.00% |
| Debt/Equity ratio | 4.63 | 4.63 |
| Cost of debt | 7.40% | 15.10% |
| After-tax WACC | 6.4% | 12.7% |
| Selected WACC | 9.5% | |
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 ALNG.OL:
cost_of_equity (12.95%) = risk_free_rate (3.55%) + equity_risk_premium (5.60%) * adjusted_beta (1.11) + 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.