The WACC of Investors House Oyj (INVEST.HE) is 6.1%.
| Range | Selected | |
| Cost of equity | 4.80% - 6.40% | 5.60% |
| Tax rate | 15.00% - 19.20% | 17.10% |
| Cost of debt | 4.80% - 11.20% | 8.00% |
| WACC | 4.4% - 7.9% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.7% | 6.7% |
| Adjusted beta | 0.36 | 0.41 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.80% | 6.40% |
| Tax rate | 15.00% | 19.20% |
| Debt/Equity ratio | 1.15 | 1.15 |
| Cost of debt | 4.80% | 11.20% |
| After-tax WACC | 4.4% | 7.9% |
| Selected WACC | 6.1% | |
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 INVEST.HE:
cost_of_equity (5.60%) = risk_free_rate (2.95%) + equity_risk_premium (6.20%) * adjusted_beta (0.36) + 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.