The WACC of Latvijas Gaze AS (GZE1R.RG) is 6.0%.
| Range | Selected | |
| Cost of equity | 5.10% - 8.40% | 6.75% |
| Tax rate | 7.40% - 10.80% | 9.10% |
| Cost of debt | 4.50% - 7.00% | 5.75% |
| WACC | 4.6% - 7.3% | 6.0% |
| Category | Low | High |
| Long-term bond rate | 1.0% | 1.5% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 0.51 | 0.75 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.10% | 8.40% |
| Tax rate | 7.40% | 10.80% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 4.50% | 7.00% |
| After-tax WACC | 4.6% | 7.3% |
| Selected WACC | 6.0% | |
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 GZE1R.RG:
cost_of_equity (6.75%) = risk_free_rate (1.25%) + equity_risk_premium (7.35%) * adjusted_beta (0.51) + 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.