The WACC of Avanza Bank Holding AB (AZA.ST) is 6.8%.
| Range | Selected | |
| Cost of equity | 7.60% - 12.70% | 10.15% |
| Tax rate | 14.10% - 14.60% | 14.35% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.7% - 7.9% | 6.8% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.99 | 1.51 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.60% | 12.70% |
| Tax rate | 14.10% | 14.60% |
| Debt/Equity ratio | 1.34 | 1.34 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.7% | 7.9% |
| Selected WACC | 6.8% | |
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 AZA.ST:
cost_of_equity (10.15%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (0.99) + 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.