The WACC of Arad Investment & Industrial Development Ltd (ARAD.TA) is 7.4%.
| Range | Selected | |
| Cost of equity | 8.10% - 10.30% | 9.20% |
| Tax rate | 23.40% - 25.00% | 24.20% |
| Cost of debt | 4.00% - 10.10% | 7.05% |
| WACC | 5.8% - 9.0% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 4.8% | 5.3% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.53 | 0.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.10% | 10.30% |
| Tax rate | 23.40% | 25.00% |
| Debt/Equity ratio | 0.87 | 0.87 |
| Cost of debt | 4.00% | 10.10% |
| After-tax WACC | 5.8% | 9.0% |
| Selected WACC | 7.4% | |
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 ARAD.TA:
cost_of_equity (9.20%) = risk_free_rate (5.05%) + equity_risk_premium (6.60%) * adjusted_beta (0.53) + 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.