The WACC of Construcciones Y Auxiliar De Ferrocarriles SA (CAF.MC) is 9.4%.
| Range | Selected | |
| Cost of equity | 11.10% - 14.60% | 12.85% |
| Tax rate | 33.80% - 36.50% | 35.15% |
| Cost of debt | 4.00% - 4.90% | 4.45% |
| WACC | 8.2% - 10.7% | 9.4% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 1.08 | 1.24 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.10% | 14.60% |
| Tax rate | 33.80% | 36.50% |
| Debt/Equity ratio | 0.52 | 0.52 |
| Cost of debt | 4.00% | 4.90% |
| After-tax WACC | 8.2% | 10.7% |
| Selected WACC | 9.4% | |
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 CAF.MC:
cost_of_equity (12.85%) = risk_free_rate (3.35%) + equity_risk_premium (7.90%) * adjusted_beta (1.08) + 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.