The WACC of Faurecia SE (EO.PA) is 5.7%.
| Range | Selected | |
| Cost of equity | 9.40% - 15.20% | 12.30% |
| Tax rate | 25.90% - 27.10% | 26.50% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.1% - 6.4% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 6.2% | 7.2% |
| Adjusted beta | 1.02 | 1.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.40% | 15.20% |
| Tax rate | 25.90% | 27.10% |
| Debt/Equity ratio | 3.21 | 3.21 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.1% | 6.4% |
| Selected WACC | 5.7% | |
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 EO.PA:
cost_of_equity (12.30%) = risk_free_rate (3.35%) + equity_risk_premium (6.70%) * 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.