The WACC of Frendy Energy SpA (FDE.MI) is 9.1%.
| Range | Selected | |
| Cost of equity | 8.50% - 10.10% | 9.30% |
| Tax rate | 11.80% - 15.70% | 13.75% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.4% - 9.9% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 8.8% | 9.8% |
| Adjusted beta | 0.48 | 0.49 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.50% | 10.10% |
| Tax rate | 11.80% | 15.70% |
| Debt/Equity ratio | 0.03 | 0.03 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.4% | 9.9% |
| Selected WACC | 9.1% | |
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 FDE.MI:
cost_of_equity (9.30%) = risk_free_rate (4.55%) + equity_risk_premium (9.30%) * adjusted_beta (0.48) + 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.