EDP.LS WACC - Weighted Average Cost of Capital

The WACC of EDP Energias de Portugal SA (EDP.LS) is 6.5%.

The Cost of Equity of EDP Energias de Portugal SA (EDP.LS) is 11.10%.

The Cost of Debt of EDP Energias de Portugal SA (EDP.LS) is 5.00%.

	Range	Selected
Cost of equity	9.80% - 12.40%	11.10%
Tax rate	22.80% - 25.50%	24.15%
Cost of debt	5.00% - 5.00%	5.00%
WACC	6.1% - 6.9%	6.5%

WACC

EDP.LS WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.9%	7.8%
Adjusted beta	1.02	1.09

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.80%	12.40%

Tax rate	22.80%	25.50%
Debt/Equity ratio	1.7	1.7
Cost of debt	5.00%	5.00%

After-tax WACC	6.1%	6.9%


Selected WACC	6.5%

EDP.LS's CAPM model and how its cost of Equity is calculated

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 EDP.LS:

cost_of_equity (11.10%) = risk_free_rate (3.15%) + equity_risk_premium (7.35%) * adjusted_beta (1.02) + 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.