ARION.IC
Arion banki hf
Price:  
171.00 
ISK
Volume:  
5,192,099.00
Iceland | Banks
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ARION.IC WACC - Weighted Average Cost of Capital

The WACC of Arion banki hf (ARION.IC) is 7.3%.

The Cost of Equity of Arion banki hf (ARION.IC) is 14.20%.
The Cost of Debt of Arion banki hf (ARION.IC) is 5.00%.

Range Selected
Cost of equity 11.60% - 16.80% 14.20%
Tax rate 23.20% - 26.10% 24.65%
Cost of debt 5.00% - 5.00% 5.00%
WACC 6.5% - 8.2% 7.3%
WACC

ARION.IC WACC calculation

Category Low High
Long-term bond rate 7.1% 7.6%
Equity market risk premium 6.3% 7.3%
Adjusted beta 0.71 1.18
Additional risk adjustments 0.0% 0.5%
Cost of equity 11.60% 16.80%
Tax rate 23.20% 26.10%
Debt/Equity ratio 1.91 1.91
Cost of debt 5.00% 5.00%
After-tax WACC 6.5% 8.2%
Selected WACC 7.3%

ARION.IC's CAPM model and how its cost of Equity is calculated

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 ARION.IC:

cost_of_equity (14.20%) = risk_free_rate (7.35%) + equity_risk_premium (6.80%) * adjusted_beta (0.71) + 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.