The WACC of Biohit Oyj (BIOBV.HE) is 7.0%.
Range | Selected | |
Cost of equity | 5.50% - 8.40% | 6.95% |
Tax rate | 13.10% - 15.20% | 14.15% |
Cost of debt | 4.00% - 24.40% | 14.20% |
WACC | 5.5% - 8.6% | 7.0% |
Category | Low | High |
Long-term bond rate | 2.7% | 3.2% |
Equity market risk premium | 5.7% | 6.7% |
Adjusted beta | 0.49 | 0.7 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 5.50% | 8.40% |
Tax rate | 13.10% | 15.20% |
Debt/Equity ratio | 0.01 | 0.01 |
Cost of debt | 4.00% | 24.40% |
After-tax WACC | 5.5% | 8.6% |
Selected WACC | 7.0% | |
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 (6.95%) = risk_free_rate (2.95%) + equity_risk_premium (6.20%) * adjusted_beta (0.49) + 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.