The WACC of Banco do Brasil SA (BBAS3.SA) is 7.6%.
| Range | Selected | |
| Cost of equity | 25.40% - 33.10% | 29.25% |
| Tax rate | 15.10% - 17.40% | 16.25% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.1% - 8.0% | 7.6% |
| Category | Low | High |
| Long-term bond rate | 11.9% | 12.4% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 1.42 | 1.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 25.40% | 33.10% |
| Tax rate | 15.10% | 17.40% |
| Debt/Equity ratio | 6.44 | 6.44 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.1% | 8.0% |
| 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 BBAS3.SA:
cost_of_equity (29.25%) = risk_free_rate (12.15%) + equity_risk_premium (10.00%) * adjusted_beta (1.42) + 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.