The WACC of ICA Gruppen AB (ICA.ST) is 5.5%.
| Range | Selected | |
| Cost of equity | 5.10% - 6.90% | 6.00% |
| Tax rate | 16.80% - 19.50% | 18.15% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.7% - 6.2% | 5.5% |
| Category | Low | High |
| Long-term bond rate | 0.6% | 1.1% |
| Equity market risk premium | 5.2% | 6.2% |
| Adjusted beta | 0.66 | 0.68 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 5.10% | 6.90% |
| Tax rate | 16.80% | 19.50% |
| Debt/Equity ratio | 0.25 | 0.25 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.7% | 6.2% |
| Selected WACC | 5.5% | |
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 ICA.ST:
cost_of_equity (6.00%) = risk_free_rate (0.85%) + equity_risk_premium (5.70%) * adjusted_beta (0.66) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.