The WACC of Banco BPM SpA (BAMI.MI) is 7.6%.
| Range | Selected | |
| Cost of equity | 13.60% - 17.80% | 15.70% |
| Tax rate | 27.70% - 30.10% | 28.90% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.9% - 8.2% | 7.6% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.2 | 1.41 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.60% | 17.80% |
| Tax rate | 27.70% | 30.10% |
| Debt/Equity ratio | 2.01 | 2.01 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.9% | 8.2% |
| Selected WACC | 7.6% | |
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 BAMI.MI:
cost_of_equity (15.70%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (1.2) + 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.