The WACC of Biohit Oyj (BIOBV.HE) is 6.5%.
| Range | Selected | |
| Cost of equity | 5.30% - 7.10% | 6.20% |
| Tax rate | 13.10% - 15.20% | 14.15% |
| Cost of debt | 4.00% - 25.50% | 14.75% |
| WACC | 5.2% - 7.8% | 6.5% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.7% | 6.7% |
| Adjusted beta | 0.36 | 0.43 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.30% | 7.10% |
| Tax rate | 13.10% | 15.20% |
| Debt/Equity ratio | 0.05 | 0.05 |
| Cost of debt | 4.00% | 25.50% |
| After-tax WACC | 5.2% | 7.8% |
| Selected WACC | 6.5% | |
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 BIOBV.HE:
cost_of_equity (6.20%) = risk_free_rate (2.95%) + equity_risk_premium (6.20%) * adjusted_beta (0.36) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.