The WACC of Kvika banki hf (KVIKA.IC) is 8.7%.
| Range | Selected | |
| Cost of equity | 10.40% - 12.40% | 11.40% |
| Tax rate | 3.60% - 7.40% | 5.50% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.1% - 9.3% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 7.1% | 7.6% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.53 | 0.59 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.40% | 12.40% |
| Tax rate | 3.60% | 7.40% |
| Debt/Equity ratio | 0.69 | 0.69 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.1% | 9.3% |
| Selected WACC | 8.7% | |
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 KVIKA.IC:
cost_of_equity (11.40%) = risk_free_rate (7.35%) + equity_risk_premium (6.80%) * adjusted_beta (0.53) + 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.