The WACC of Euskaltel SA (EKT.MC) is 7.9%.
| Range | Selected | |
| Cost of equity | 7.70% - 10.20% | 8.95% |
| Tax rate | 19.30% - 21.00% | 20.15% |
| Cost of debt | 4.00% - 12.20% | 8.10% |
| WACC | 5.8% - 10.0% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.79 | 0.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.70% | 10.20% |
| Tax rate | 19.30% | 21.00% |
| Debt/Equity ratio | 0.75 | 0.75 |
| Cost of debt | 4.00% | 12.20% |
| After-tax WACC | 5.8% | 10.0% |
| Selected WACC | 7.9% | |
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 EKT.MC:
cost_of_equity (8.95%) = risk_free_rate (3.05%) + equity_risk_premium (6.80%) * adjusted_beta (0.79) + 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.