The WACC of Iren SpA (IRE.MI) is 5.5%.
| Range | Selected | |
| Cost of equity | 6.90% - 10.30% | 8.60% |
| Tax rate | 27.00% - 28.30% | 27.65% |
| Cost of debt | 4.00% - 4.70% | 4.35% |
| WACC | 4.6% - 6.4% | 5.5% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.39 | 0.61 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 10.30% |
| Tax rate | 27.00% | 28.30% |
| Debt/Equity ratio | 1.32 | 1.32 |
| Cost of debt | 4.00% | 4.70% |
| After-tax WACC | 4.6% | 6.4% |
| Selected WACC | 5.5% | |
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 IRE.MI:
cost_of_equity (8.60%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.39) + 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.