The WACC of Eik fasteignafelag hf (EIK.IC) is 8.8%.
| Range | Selected | |
| Cost of equity | 9.60% - 11.80% | 10.70% |
| Tax rate | 20.00% - 20.10% | 20.05% |
| Cost of debt | 4.00% - 15.60% | 9.80% |
| WACC | 5.4% - 12.2% | 8.8% |
| Category | Low | High |
| Long-term bond rate | 7.1% | 7.6% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.4 | 0.5 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.60% | 11.80% |
| Tax rate | 20.00% | 20.10% |
| Debt/Equity ratio | 1.91 | 1.91 |
| Cost of debt | 4.00% | 15.60% |
| After-tax WACC | 5.4% | 12.2% |
| Selected WACC | 8.8% | |
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 EIK.IC:
cost_of_equity (10.70%) = risk_free_rate (7.35%) + equity_risk_premium (6.80%) * adjusted_beta (0.4) + 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.