The WACC of Interoil Exploration and Production ASA (IOX.OL) is 5.6%.
| Range | Selected | |
| Cost of equity | 6.90% - 9.80% | 8.35% |
| Tax rate | 22.00% - 22.00% | 22.00% |
| Cost of debt | 4.80% - 7.00% | 5.90% |
| WACC | 4.6% - 6.6% | 5.6% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.71 | 0.89 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 9.80% |
| Tax rate | 22.00% | 22.00% |
| Debt/Equity ratio | 2.75 | 2.75 |
| Cost of debt | 4.80% | 7.00% |
| After-tax WACC | 4.6% | 6.6% |
| 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 IOX.OL:
cost_of_equity (8.35%) = risk_free_rate (3.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.71) + 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.