The WACC of GPI SpA (GPI.MI) is 5.9%.
| Range | Selected | |
| Cost of equity | 7.00% - 11.80% | 9.40% |
| Tax rate | 33.80% - 40.10% | 36.95% |
| Cost of debt | 4.00% - 7.30% | 5.65% |
| WACC | 4.4% - 7.3% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.4 | 0.77 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.00% | 11.80% |
| Tax rate | 33.80% | 40.10% |
| Debt/Equity ratio | 1.51 | 1.51 |
| Cost of debt | 4.00% | 7.30% |
| After-tax WACC | 4.4% | 7.3% |
| Selected WACC | 5.9% | |
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 GPI.MI:
cost_of_equity (9.40%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.4) + 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.