The WACC of Icelandair Group hf (ICEAIR.IC) is 7.4%.
| Range | Selected | |
| Cost of equity | 10.60% - 13.90% | 12.25% |
| Tax rate | 19.10% - 29.00% | 24.05% |
| Cost of debt | 5.50% - 7.00% | 6.25% |
| WACC | 6.7% - 8.2% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 7.1% | 7.6% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.55 | 0.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.60% | 13.90% |
| Tax rate | 19.10% | 29.00% |
| Debt/Equity ratio | 1.78 | 1.78 |
| Cost of debt | 5.50% | 7.00% |
| After-tax WACC | 6.7% | 8.2% |
| Selected WACC | 7.4% | |
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 ICEAIR.IC:
cost_of_equity (12.25%) = risk_free_rate (7.35%) + equity_risk_premium (6.80%) * adjusted_beta (0.55) + 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.