The WACC of Investors House Oyj (INVEST.HE) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.40% - 6.90% | 6.15% |
| Tax rate | 13.80% - 19.20% | 16.50% |
| Cost of debt | 4.00% - 8.00% | 6.00% |
| WACC | 4.7% - 6.8% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.7% | 6.7% |
| Adjusted beta | 0.38 | 0.4 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.40% | 6.90% |
| Tax rate | 13.80% | 19.20% |
| Debt/Equity ratio | 0.54 | 0.54 |
| Cost of debt | 4.00% | 8.00% |
| After-tax WACC | 4.7% | 6.8% |
| Selected WACC | 5.7% | |
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 (6.15%) = risk_free_rate (2.95%) + equity_risk_premium (6.20%) * adjusted_beta (0.38) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.