The WACC of Valeo SA (FR.PA) is 5.8%.
| Range | Selected | |
| Cost of equity | 12.20% - 15.60% | 13.90% |
| Tax rate | 32.20% - 37.20% | 34.70% |
| Cost of debt | 4.00% - 6.10% | 5.05% |
| WACC | 5.0% - 6.7% | 5.8% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 1.58 | 1.71 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.20% | 15.60% |
| Tax rate | 32.20% | 37.20% |
| Debt/Equity ratio | 3.19 | 3.19 |
| Cost of debt | 4.00% | 6.10% |
| After-tax WACC | 5.0% | 6.7% |
| Selected WACC | 5.8% | |
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 FR.PA:
cost_of_equity (13.90%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (1.58) + 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.