The WACC of Geratherm Medical AG (GME.DE) is 5.1%.
| Range | Selected | |
| Cost of equity | 4.30% - 6.50% | 5.40% |
| Tax rate | 20.20% - 30.40% | 25.30% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 4.0% - 6.1% | 5.1% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.2 | 0.36 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 4.30% | 6.50% |
| Tax rate | 20.20% | 30.40% |
| Debt/Equity ratio | 0.29 | 0.29 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 4.0% | 6.1% |
| Selected WACC | 5.1% | |
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 GME.DE:
cost_of_equity (5.40%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (0.2) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.