The WACC of Liberbank SA (LBK.MC) is 5.0%.
| Range | Selected | |
| Cost of equity | 11.70% - 27.50% | 19.60% |
| Tax rate | 27.90% - 32.50% | 30.20% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.4% - 5.6% | 5.0% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 1.41 | 3.24 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.70% | 27.50% |
| Tax rate | 27.90% | 32.50% |
| Debt/Equity ratio | 9.62 | 9.62 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.4% | 5.6% |
| Selected WACC | 5.0% | |
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 LBK.MC:
cost_of_equity (19.60%) = risk_free_rate (3.05%) + equity_risk_premium (6.80%) * adjusted_beta (1.41) + 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.