The WACC of Elkem ASA (ELK.OL) is 7.9%.
| Range | Selected | |
| Cost of equity | 10.20% - 13.40% | 11.80% |
| Tax rate | 24.80% - 31.70% | 28.25% |
| Cost of debt | 4.00% - 8.60% | 6.30% |
| WACC | 6.4% - 9.5% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.34 | 1.49 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.20% | 13.40% |
| Tax rate | 24.80% | 31.70% |
| Debt/Equity ratio | 1.11 | 1.11 |
| Cost of debt | 4.00% | 8.60% |
| After-tax WACC | 6.4% | 9.5% |
| 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 ELK.OL:
cost_of_equity (11.80%) = risk_free_rate (3.55%) + equity_risk_premium (5.60%) * adjusted_beta (1.34) + 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.