The WACC of Fabege AB (FABG.ST) is 4.8%.
| Range | Selected | |
| Cost of equity | 5.00% - 6.70% | 5.85% |
| Tax rate | 20.50% - 22.70% | 21.60% |
| Cost of debt | 4.00% - 6.10% | 5.05% |
| WACC | 4.0% - 5.6% | 4.8% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.49 | 0.52 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.00% | 6.70% |
| Tax rate | 20.50% | 22.70% |
| Debt/Equity ratio | 1.31 | 1.31 |
| Cost of debt | 4.00% | 6.10% |
| After-tax WACC | 4.0% | 5.6% |
| Selected WACC | 4.8% | |
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 FABG.ST:
cost_of_equity (5.85%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (0.49) + 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.