The WACC of BNP Paribas SA (BNP.PA) is 5.9%.
| Range | Selected | |
| Cost of equity | 13.00% - 17.30% | 15.15% |
| Tax rate | 26.20% - 27.50% | 26.85% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.5% - 6.2% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 1.72 | 1.95 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.00% | 17.30% |
| Tax rate | 26.20% | 27.50% |
| Debt/Equity ratio | 4.21 | 4.21 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.5% | 6.2% |
| Selected WACC | 5.9% | |
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 BNP.PA:
cost_of_equity (15.15%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (1.72) + 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.