The WACC of Eltel AB (ELTEL.ST) is 6.5%.
| Range | Selected | |
| Cost of equity | 5.60% - 8.60% | 7.10% |
| Tax rate | 36.10% - 41.20% | 38.65% |
| Cost of debt | 8.30% - 11.00% | 9.65% |
| WACC | 5.4% - 7.6% | 6.5% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.6 | 0.84 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.60% | 8.60% |
| Tax rate | 36.10% | 41.20% |
| Debt/Equity ratio | 0.98 | 0.98 |
| Cost of debt | 8.30% | 11.00% |
| After-tax WACC | 5.4% | 7.6% |
| Selected WACC | 6.5% | |
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 ELTEL.ST:
cost_of_equity (7.10%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (0.6) + 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.