The WACC of Holand og Setskog Sparebank (HSPG.OL) is 4.4%.
| Range | Selected | |
| Cost of equity | 9.40% - 19.80% | 14.60% |
| Tax rate | 20.80% - 21.00% | 20.90% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.2% - 4.6% | 4.4% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.19 | 2.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.40% | 19.80% |
| Tax rate | 20.80% | 21.00% |
| Debt/Equity ratio | 23.28 | 23.28 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.2% | 4.6% |
| Selected WACC | 4.4% | |
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 HSPG.OL:
cost_of_equity (14.60%) = risk_free_rate (3.55%) + equity_risk_premium (5.60%) * adjusted_beta (1.19) + 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.