The WACC of Firstfarms A/S (FFARMS.CO) is 7.2%.
| Range | Selected | |
| Cost of equity | 5.40% - 8.30% | 6.85% |
| Tax rate | 22.10% - 23.20% | 22.65% |
| Cost of debt | 5.70% - 14.50% | 10.10% |
| WACC | 5.0% - 9.5% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.51 | 0.75 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.40% | 8.30% |
| Tax rate | 22.10% | 23.20% |
| Debt/Equity ratio | 0.75 | 0.75 |
| Cost of debt | 5.70% | 14.50% |
| After-tax WACC | 5.0% | 9.5% |
| Selected WACC | 7.2% | |
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 FFARMS.CO:
cost_of_equity (6.85%) = risk_free_rate (2.95%) + equity_risk_premium (5.60%) * adjusted_beta (0.51) + 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.