The WACC of Hornbach Baumarkt AG (HBM.DE) is 6.4%.
| Range | Selected | |
| Cost of equity | 7.10% - 10.10% | 8.60% |
| Tax rate | 24.80% - 26.40% | 25.60% |
| Cost of debt | 5.40% - 6.90% | 6.15% |
| WACC | 5.5% - 7.3% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 1.08 | 1.23 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.10% | 10.10% |
| Tax rate | 24.80% | 26.40% |
| Debt/Equity ratio | 1.19 | 1.19 |
| Cost of debt | 5.40% | 6.90% |
| After-tax WACC | 5.5% | 7.3% |
| Selected WACC | 6.4% | |
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 HBM.DE:
cost_of_equity (8.60%) = risk_free_rate (2.25%) + equity_risk_premium (5.20%) * adjusted_beta (1.08) + 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.