The WACC of Itausa SA (ITSA4.SA) is 16.7%.
| Range | Selected | |
| Cost of equity | 16.30% - 18.40% | 17.35% |
| Tax rate | 1.30% - 1.90% | 1.60% |
| Cost of debt | 7.00% - 10.40% | 8.70% |
| WACC | 15.6% - 17.9% | 16.7% |
| Category | Low | High |
| Long-term bond rate | 11.9% | 12.4% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.47 | 0.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 16.30% | 18.40% |
| Tax rate | 1.30% | 1.90% |
| Debt/Equity ratio | 0.08 | 0.08 |
| Cost of debt | 7.00% | 10.40% |
| After-tax WACC | 15.6% | 17.9% |
| Selected WACC | 16.7% | |
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 ITSA4.SA:
cost_of_equity (17.35%) = risk_free_rate (12.15%) + equity_risk_premium (10.00%) * adjusted_beta (0.47) + 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.