The WACC of Cosan SA (CSAN3.SA) is 15.3%.
Range | Selected | |
Cost of equity | 17.50% - 21.70% | 19.60% |
Tax rate | 6.70% - 13.40% | 10.05% |
Cost of debt | 8.90% - 23.60% | 16.25% |
WACC | 9.9% - 20.7% | 15.3% |
Category | Low | High |
Long-term bond rate | 11.9% | 12.4% |
Equity market risk premium | 9.5% | 10.5% |
Adjusted beta | 0.6 | 0.84 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 17.50% | 21.70% |
Tax rate | 6.70% | 13.40% |
Debt/Equity ratio | 4.87 | 4.87 |
Cost of debt | 8.90% | 23.60% |
After-tax WACC | 9.9% | 20.7% |
Selected WACC | 15.3% | |
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 CSAN3.SA:
cost_of_equity (19.60%) = risk_free_rate (12.15%) + equity_risk_premium (10.00%) * adjusted_beta (0.6) + 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.