The WACC of Indra Sistemas SA (IDR.MC) is 9.5%.
| Range | Selected | |
| Cost of equity | 9.10% - 11.70% | 10.40% |
| Tax rate | 29.50% - 31.10% | 30.30% |
| Cost of debt | 4.00% - 5.10% | 4.55% |
| WACC | 8.3% - 10.6% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 0.81 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.10% | 11.70% |
| Tax rate | 29.50% | 31.10% |
| Debt/Equity ratio | 0.15 | 0.15 |
| Cost of debt | 4.00% | 5.10% |
| After-tax WACC | 8.3% | 10.6% |
| Selected WACC | 9.5% | |
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 IDR.MC:
cost_of_equity (10.40%) = risk_free_rate (3.35%) + equity_risk_premium (7.90%) * adjusted_beta (0.81) + 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.