The WACC of Banco do Brasil SA (BBAS3.SA) is 7.4%.
| Range | Selected | |
| Cost of equity | 23.30% - 29.00% | 26.15% |
| Tax rate | 15.10% - 17.40% | 16.25% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.0% - 7.8% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 11.9% | 12.4% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 1.2 | 1.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 23.30% | 29.00% |
| Tax rate | 15.10% | 17.40% |
| Debt/Equity ratio | 5.8 | 5.8 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.0% | 7.8% |
| 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 BBAS3.SA:
cost_of_equity (26.15%) = risk_free_rate (12.15%) + equity_risk_premium (10.00%) * 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.