The WACC of International Petroleum Corp (IPCO.ST) is 7.8%.
| Range | Selected | |
| Cost of equity | 7.70% - 10.00% | 8.85% |
| Tax rate | 24.40% - 25.70% | 25.05% |
| Cost of debt | 4.00% - 7.10% | 5.55% |
| WACC | 6.7% - 8.9% | 7.8% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.01 | 1.06 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.70% | 10.00% |
| Tax rate | 24.40% | 25.70% |
| Debt/Equity ratio | 0.28 | 0.28 |
| Cost of debt | 4.00% | 7.10% |
| After-tax WACC | 6.7% | 8.9% |
| Selected WACC | 7.8% | |
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 IPCO.ST:
cost_of_equity (8.85%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (1.01) + 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.