The WACC of Les Hotels de Paris SA (HDP.PA) is 4.7%.
| Range | Selected | |
| Cost of equity | 3.20% - 10.30% | 6.75% |
| Tax rate | 5.70% - 13.70% | 9.70% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.6% - 4.8% | 4.7% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | -0.39 | 0.55 |
| Additional risk adjustments | 2.5% | 3.0% |
| Cost of equity | 3.20% | 10.30% |
| Tax rate | 5.70% | 13.70% |
| Debt/Equity ratio | 10.73 | 10.73 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.6% | 4.8% |
| Selected WACC | 4.7% | |
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 HDP.PA:
cost_of_equity (6.75%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (-0.39) + risk_adjustments (2.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.