The WACC of Banco Comercial Portugues SA (BCP.LS) is 9.3%.
| Range | Selected | |
| Cost of equity | 10.20% - 14.30% | 12.25% |
| Tax rate | 21.00% - 21.00% | 21.00% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.0% - 10.6% | 9.3% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 1.07 | 1.33 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.20% | 14.30% |
| Tax rate | 21.00% | 21.00% |
| Debt/Equity ratio | 0.56 | 0.56 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.0% | 10.6% |
| Selected WACC | 9.3% | |
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 BCP.LS:
cost_of_equity (12.25%) = risk_free_rate (3.15%) + equity_risk_premium (7.35%) * adjusted_beta (1.07) + 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.