The WACC of Banca IFIS SpA (IF.MI) is 5.6%.
| Range | Selected | |
| Cost of equity | 11.80% - 18.90% | 15.35% |
| Tax rate | 31.80% - 32.30% | 32.05% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.0% - 6.3% | 5.6% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.98 | 1.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.80% | 18.90% |
| Tax rate | 31.80% | 32.30% |
| Debt/Equity ratio | 4.34 | 4.34 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.0% | 6.3% |
| Selected WACC | 5.6% | |
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 IF.MI:
cost_of_equity (15.35%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.98) + 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.