The WACC of Bayer AG (BAYN.DE) is 7.4%.
| Range | Selected | |
| Cost of equity | 10.10% - 13.80% | 11.95% |
| Tax rate | 10.40% - 26.50% | 18.45% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 6.2% - 8.6% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.43 | 1.64 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.10% | 13.80% |
| Tax rate | 10.40% | 26.50% |
| Debt/Equity ratio | 1.51 | 1.51 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 6.2% | 8.6% |
| 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 BAYN.DE:
cost_of_equity (11.95%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (1.43) + 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.