The WACC of Latvijas balzams AS (BAL1R.RG) is 4.6%.
| Range | Selected | |
| Cost of equity | 3.60% - 5.50% | 4.55% |
| Tax rate | 20.00% - 20.00% | 20.00% |
| Cost of debt | 4.00% - 8.50% | 6.25% |
| WACC | 3.6% - 5.6% | 4.6% |
| Category | Low | High |
| Long-term bond rate | 1.0% | 1.5% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 0.37 | 0.44 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 3.60% | 5.50% |
| Tax rate | 20.00% | 20.00% |
| Debt/Equity ratio | 0.04 | 0.04 |
| Cost of debt | 4.00% | 8.50% |
| After-tax WACC | 3.6% | 5.6% |
| Selected WACC | 4.6% | |
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 BAL1R.RG:
cost_of_equity (4.55%) = risk_free_rate (1.25%) + equity_risk_premium (7.35%) * adjusted_beta (0.37) + 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.