The WACC of Draegerwerk AG & Co KGaA (DRW8.DE) is 6.9%.
| Range | Selected | |
| Cost of equity | 6.90% - 9.10% | 8.00% |
| Tax rate | 32.40% - 34.90% | 33.65% |
| Cost of debt | 4.00% - 4.70% | 4.35% |
| WACC | 6.0% - 7.8% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.81 | 0.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 9.10% |
| Tax rate | 32.40% | 34.90% |
| Debt/Equity ratio | 0.28 | 0.28 |
| Cost of debt | 4.00% | 4.70% |
| After-tax WACC | 6.0% | 7.8% |
| Selected WACC | 6.9% | |
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 DRW8.DE:
cost_of_equity (8.00%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (0.81) + 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.