The WACC of Deutsche Lufthansa AG (LHA.DE) is 6.7%.
| Range | Selected | |
| Cost of equity | 7.20% - 11.10% | 9.15% |
| Tax rate | 16.20% - 17.50% | 16.85% |
| Cost of debt | 4.00% - 8.00% | 6.00% |
| WACC | 5.0% - 8.5% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.88 | 1.19 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.20% | 11.10% |
| Tax rate | 16.20% | 17.50% |
| Debt/Equity ratio | 1.41 | 1.41 |
| Cost of debt | 4.00% | 8.00% |
| After-tax WACC | 5.0% | 8.5% |
| Selected WACC | 6.7% | |
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 LHA.DE:
cost_of_equity (9.15%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (0.88) + 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.