The WACC of BW Energy Ltd (BWE.OL) is 4.7%.
| Range | Selected | |
| Cost of equity | 4.40% - 6.40% | 5.40% |
| Tax rate | 32.00% - 36.90% | 34.45% |
| Cost of debt | 5.50% - 5.80% | 5.65% |
| WACC | 4.1% - 5.3% | 4.7% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.2 | 0.34 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.40% | 6.40% |
| Tax rate | 32.00% | 36.90% |
| Debt/Equity ratio | 0.67 | 0.67 |
| Cost of debt | 5.50% | 5.80% |
| After-tax WACC | 4.1% | 5.3% |
| Selected WACC | 4.7% | |
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 BWE.OL:
cost_of_equity (5.40%) = risk_free_rate (3.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.2) + 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.